Axiom's Victor Anthony: Keep Buying Facebook, Stock Is Still Cheap

Facebook Inc (NASDAQ: FB) displayed strong 2Q16 results, with the metrics beating the estimates across the board and ex-FX advertising revenue growth coming in at 63 percent.

Axiom’s Victor Anthony maintains a Buy rating on the company, while raising the price target from $155 to $160.

Stock Still Cheap

Anthony mentioned that the company was taking advertising share, while user growth was robust and overall engagement was stable.

However, the analyst also noted that “Facebook cautioned about tough comps in 2H16, and stated that ad loads will grow into mid-2017, and will have less of an impact on revenue growth thereafter, and the rate at which revenues will grow will be impacted.”

Related Link: Facebook Has Missed Earnings Estimates Just Once Since 2012 IPO

Anthony expects an offset in the form of continued robust user growth and engagement, improved ad targeting, video, Instagram and monetization of Messenger, and potentially WhatsApp.

“The stock is still cheap,” Anthony commented.

Solid Results

Facebook reported revenue of $6.436 billion, ahead of the estimates and driven by ad revenue growth.

Non-GAAP operating margin came in at 58.5 percent, growing 336 bps year-on-year and beating the estimate, driven by revenue upside and lower than estimated R&D and G&A.

The non-GAAP EPS also beat the estimate, while advertising demand remained strong during the quarter.

Mobile advertising revenue grew 76 percent year-on-year and increased to 84 percent of the total ad revenue.

The revenue and adjusted EBITDA estimates for 2016 have been raised.

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