Goldman Sachs On Facebook: We 'Like' It Despite FX, Lower Ad Outlook

In a report published Thursday, Goldman Sachs analyst Heather Bellini reviewed Facebook Inc (NASDAQ: FB)'s second-quarter results.

Foreign exchange remained a "significant headwind" on revenue during the quarter, reaching 1,100 basis points ($330 million) versus 700 basis points year over year in the first quarter ($190 million).

Facebook said that foreign exchange headwinds in the third quarter will remain significant. The analyst is estimating third quarter revenue will face a 1,100 basis points foreign exchange headwind ($350 million) if rates remain at current levels. For the full year, the analyst is forecasting a roughly 1,000 basis point year over year headwind ($1.17 billion), marking an increase from a previous forecast of 700 basis points headwind ($900 million).

Bellini continued that she is projecting full year calendar 2015 advertising revenue to grow 40 percent year-over-year to $16.1 billion, consistent with a prior forecast of 41 percent growth to $16.2 billion. The analyst's forecast for mobile ad revenue growth has been lowered to 66 percent year-over-year growth (to $12.3 billion) from a prior estimate of 68 percent growth (to $12.5 billion).

However, since Facebook's management tightened its range for total expense growth in 2015, the lower expense base translates to a higher earnings per share expectation. The analyst is now expecting Facebook to earn $2.01 per share in 2015, up from a prior estimate of $2.00.

Finally, Bellini stated that her field checks continue to "pick up" strong pricing trends, driven by new ad formats including video and dynamic product ads. The analyst stated that her contacts point towards a growing base of brand advertisers competing in auctions with traditional direct response marketers.

"As such, we continue to believe that with new products such as video showing strong effectiveness and generating significant advertiser interest, as well as products that can help customers expand reach and tap into Facebook's knowledge graph across the web, we see the company's momentum continuing," Bellini concluded.

Shares remain Buy rated with a price target raised to $110 from a previous $102.