Facebook had a big quarter.
The social network generated earnings of $US0.50 per share, beating expectations for $US0.47. This was on better-than-expected revenue, which jumped 39% year-over-year to $US4.04 billion.
“This was another strong quarter for our community,” CEO Mark Zuckerberg said. “Engagement across our family of apps keeps growing, and we remain focused on improving the quality of our services.”
Daily active users climbed 17% to 968 million, but that was a little bit lower than the 970 million expected by analysts.
The stock closed at $US96.99 on Wednesday and slipped by around 2% after the news.
Wall Street analysts covering Facebook are one-sidedly bullish. Of the 13 research notes read by Business Insider, 12 analysts maintained a “buy” or “outperform” rating on the stock. Their price targets range from $US105 to $US120. Just one analyst is neutral. No one is saying to sell.
From what we’ve read, much of the excitement about Facebook isn’t really about Facebook in the traditional sense. It’s a more about the newer platforms — like Instagram, Oculus, WhatsApp, and FB Messenger — and the opportunities to monetise.
Here’s some of what they had to say:
Price Target: $US120 (revised from $US105)
Comment: 'FB continues to post impressive mobile ad revenue above our estimates, even on very tough comps. FX again negatively pressured results in 2Q. We continue to see multiple meaningful go-forward growth levers in Instagram, new ad formats including video ads, the Facebook Audience Network, improved ad pricing, and WhatsApp. Management tightened the range for full year opex guide, a positive.'
Price Target: $US115-$US120
Comment: 'We view the evolution of social platforms as the most significant digital marketing development since the emergence of search, and believe Facebook's audience scale, targeting capabilities, and social connectivity offer opportunity for marketers across the category, size, and regional spectrum. In short, we view marketer participation on the FB platform as compulsory, and expect FB to be the leading share beneficiary of funds flowing to social and mobile ad platforms.'
Price Target: $US115 (revised from $US100)
Comment: 'Our bullish thesis is predicated on: 1) steady growth in price and ad effectiveness for core FB driving near term upside to consensus, as shown in 2Q, 2) further out-year estimate revisions when FB starts to monetise its other -apps, and 3) little to no multiple expansion.'
Price Target: $US115 (revised from $US110)
Comment: 'We are encouraged by the continued strength in the core platform and believe increasing monetisation of newer platforms including Instagram (increased roll out in 2H15), Oculus (1Q16 device roll out), WhatsApp, and FB Messenger should continue to drive solid growth.'
Price Target: $US110 (revised from $US102)
Comment: 'We see Facebook's mobile ad story to continue to be on a strong trajectory with potential upside drivers in 2H15 including Instagram, video, and dynamic product ads. Further, our field checks suggest a growing base of brand advertisers competing in auctions with traditional direct response marketers, which we see an incremental driver of pricing growth.'
Price Target: $US110 (revised from $US106)
Comment: 'As we look towards 2016 and beyond, we believe Facebook remains positioned to benefit from multiple initiatives which include: 1) Premium Video which should exert a greater impact in 2H15, 2) Instagram, and 3) the continued adoption of the Audience Network. Looking longer-term, there remains optionality from as-of-yet monetized properties such as WhatsApp.'
Price Target: $US110
Comment: 'FB's accelerating ad dollars per user and better than expected profitability leave us bullish on FB's ability to continue to garner a larger share of ad budgets and produce upward revisions even as quarterly dollar growth compares becomes larger. '
Price Target: $US108 (revised from $US95)
Comment: 'We believe the story increasingly becomes one of long-term sustained growth and we note that Facebook will be facing easier comps throughout the year. Facebook maintains key catalysts in video ads, Instagram monetisation, and off-platform monetisation, and longer-term potentially the monetisation of FB Messenger, WhatsApp, and more speculative plays like Oculus. More broadly, third-party reports suggest Facebook has significantly increased its click-through-rates, now at roughly half the rate of search and ~15x the average of traditional display ads.'
Price Target: $US107 (revised from $US104)
Comment: 'Facebook still has one of the strongest revenue CAGRs of any large-cap Internet company (40%+) and one of the best margin profiles of any large-cap 'Net company. We'd be buyers on any weakness, as Facebook remains our top pick.'
Price Target: $US106 (revised from $US92)
Comment: 'Importantly, user engagement, the most critical metric, in our view, remains exceptionally strong. The core advertising business actually accelerated slightly on an FX-adj. basis. Video is clearly the key driver and we expect that to continue. In fact, we believe that FB will launch a more direct competitor to YouTube via a stand- alone app focused on video. While the timing is uncertain (likely'16), this is not conventional wisdom, and if we are right, it will be a meaningful driver.'
Price Target: $US105
Comment: 'While the quarter may have lacked the big positive surprise factor of prior 2014 FB quarters or Google's recent results, results in 2Q suggest FB engagement is strong (65% of users check the site daily) and that the mobile transition remains a bigger tailwind for Facebook than any other large-cap. in the Internet media group. With Instagram monetisation still ahead (we estimate a $US4+bn opportunity) we think Facebook is in best position in sector to meet/beat street expectations.'
Price Target: $US105 (revised from $US98)
Comment: 'While we believe expectations had clearly moved up into the print, and results may have come in a touch shy of whisper numbers, we view the results as another solid indication of Facebook's overall market strength.'
Rating: Sector Weight
Price Target: N/A
Comment: 'Facebook posted strong Q2 results. Revenue and EBITDA both beat our estimates. The big drivers were ad load and the number of impressions served, while price per ad was flattish sequentially. Solid results continue, but valuation and expectations continue to prevent us from recommending FB.'
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