Facebook stock jumped Wednesday, following a quarterly earnings report late Tuesday that was not as bad as analysts feared, though the company received several price target cuts.
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Facebook (FB) reported mixed results for the third quarter. Revenue of $23.7 billion was slightly below analyst forecasts, though earnings of $1.76 per share topped views.
Facebook's revenue guidance was also an improvement from previous reports. For the fourth quarter, Facebook now expects revenue growth to slow by "mid-to-high single-digits" from the third quarter. That's slightly better than previous predictions for revenue growth in the "high-single-digits."
Reasons for the revenue deceleration in the past two quarters include a shift toward Facebook properties with lower monetization rates. There also was a negative pricing impact from data privacy policy changes. Facebook also said that core users are nearing saturation in some developed markets.
On a call with analysts, Facebook emphasized the growing importance and usage of the Stories feature on its Instagram platform. Stories is a feature Facebook copied from the Snapchat platform of Snap (SNAP).
With Stories, users can post photos and videos that are automatically deleted after a period of time. It's becoming increasingly popular with Facebook users. But Facebook has yet to settle on the best way to build a business model around it.
Facebook stock closed at 151.79, up 3.8% on the stock market today, rebounding from a 19-month low.
Facebook Price Target Cuts
"Overall, we believe last night's conference call had the potential to be much worse than it actually was," Monnes Crespi Hardt analyst Brian White said in a note to clients. White cut his price target on Facebook stock to 190 from 205, though he kept a buy rating.
"Facebook is seeing good growth opportunities in 2019," he wrote. "However, the company believes it is still too early to provide any revenue outlook for next year."
FBN Securities analyst Shebly Seyrafi cut his price target on Facebook stock to 190 from 200, with a rating of outperform. "Even though we retain our positive stance on the equity, the company is undergoing challenging transitions right now with the move to video, Stories, and private messaging," he wrote in his report to clients.
Canaccord Genuity analyst Michael Graham lowered his price target to 185 from 200 but maintained a buy rating.
A Rocky Second Quarter
"After a rocky second quarter that lowered expectations for revenue growth and margins, these results should serve to remind investors that Facebook still offers a multifaceted growth story," Graham wrote in his note.
Nomura analyst Mark Kelley cut his price target on Facebook to 161 from 183, with a rating of neutral.
"The revenue trajectory from here seems to depend on how effectively the company is able to switch from a news feed-centric platform to Stories as the primary driver," Kelley wrote.
UBS analyst Eric Sheridan lowered his price target to 160 from 180, saying "Facebook remains a business in transition."
And Raymond James analyst Aaron Kessler cut his Facebook price target to 180 from 210, with a rating of outperform.
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The post Facebook Stock Rallies On Earnings Report That Was Better Than Feared appeared first on Investor's Business Daily.
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