Facebook Has Potential To Be 'Central Nexus' For Discovery

Following the robust 1Q results reported by Facebook Inc (NASDAQ: FB), Robert "Bob" S. Peck of SunTrust Robinson Humphrey stated, “Expectations remain high and investors may overestimate the timing, adoption and success of new products.”

Peck maintained a Buy rating on the company, while raising the price target from $125 to $135.

1Q Beat

According to the SunTrust report, “Facebook's 1Q report refuted the growing concerns that 1Q was broadly impacted by macro digital advertising weakness across the industry.”

The company reported higher than expected ad revenues, which grew 63 percent year-on-year, ex-FX.

Related Link: JPMorgan Sets $161 Price Target On Facebook, Highest On The Street

Opex margins at 55 percent were also above expectations, and the company intends to continue with high investment in future.

“Lastly, at 50 minutes of activity per day, and 2 billion users on Messenger and WhatsApp yet to be monetized, we believe Facebook has a long runway,” Peck mentioned.

Facebook’s Platform

Peck also pointed out that more than 3 million advertisers on Facebook and 200,000 on Instagram suggests continued traction.

“Recall there are >50 million SMBs on the platform and Facebook has the potential to be a central nexus for discovery as well as reaching and engaging with customers,” the analyst added.

The company maintained its operating expense growth guidance at 45–55 percent, despite the mere 41 percent growth in 1Q, which implies increased expenses through 2016.