Bob Peck: Five Reasons to Like Facebook

My fave social media analyst, SunTrust’s Bob Peck, is out with a bullish report on Facebook shares this morning, with higher revenue and cash flow estimates along with an upped price target ($65 from $55).

He sees five drivers of the stock from here:

Five Factors Driving Increased Optimism. Our more bullish outlook is driven by 5 factors: 1) Ad load concerns seem to be overdone and are being offset by better targeting & pricing; 2) Teen usage concerns are over blown, as Facebook has crossed the chasm from “cool app” to a utility; 3) Social apps, and Facebook particularly, seemed to have a strong 4Q based on 3rd party reports; 4) the monetization of Instagram has begun, helping counter a tough comp; 5) Mobile video ads have begun, also helping a tough comp. We think Instagram and video ads can add ~$300m in new revenues in 2014.

Number 2 is interesting – how important is it to be considered “cool” at this point? Does the media make too much of the so-called cool factor when discussing Facebook’s future as a business? Can anything with a billion users be considered cool anyway, at the end of the day? McDonalds isn’t cool, but that doesn’t stop trillions of meals being sold there. The Gap isn’t cool – but don’t tell that to its share price, which has recently doubled.

Just a thought.


FB – Raising Estimates and Target Based on 5 Factors – Reiterate Buy
SunTrust Robinson Humphrey Equity Research

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