Investors Continue To Debate The Fate Of Facebook Under Trump; Shares Could Approach $150

William Blair says Facebook Inc (NASDAQ: FB) shares could approach $150 while investors continue to debate the fate of the social media giant under the upcoming Trump presidency.

Facebook shares, along with other large-cap internet stocks, sold off after the election as investors took some money off the stock in favor of financials and infrastructure plays on the hopes of a faster-growth, higher interest rate and less regulatory environment.

The brokerage’s conversations with short-term investors, suggest that the tech rebalancing may reverse for high-growth tech names that sold off in November and December 2016.

“For Facebook, some are focused on the second quarter 2017 as the last quarter of reaccelerating comps, and perhaps being positioned sometime in late first quarter 2017 as a tactical play and a potential period when the stock can start “working” again,” analyst Ralph Schackart wrote in a note.

Outperform Rating, Justification

But, Schackart maintains his Outperform rating on Facebook shares and said the stock could approach $150, based on 18 times his 2017 EBITDA estimates.

“We still believe the company’s fundamentals remain strong; Facebook has the ‘first call’ on performance advertising budgets and the opportunity to broaden into more brand ad budgets going forward,” the analyst highlighted.

Schackart’s checks indicate Facebook's video had strong performance in the fourth quarter and grew to 20 to 25 percent of total spend with spend approaching 25 percent toward the end of the quarter.

The brokerage’s field research suggests that Facebook will likely begin rolling out new brand products in 2017, within “the next several quarters” and unveil new set of brand advertising metrics and products to help address a large market opportunity for Facebook in 2017.

The analyst increased his 2017 EPS/revenue estimates to $5.20/$36.689 billion from $5.01/$36.073 billion. Schackart now sees Facebook ad revenue to grow 35 percent in 2017 (up from 33 percent previously).