Daily Management Review

Wall Street Bullish Over Facebook’s Plans on New Investments


Wall Street Bullish Over Facebook’s Plans on New Investments
Facebook earned applauds from the Wall Street analysts who see long term growth possibility after Facebook announced plans to focus spending on its two messaging services, Instagram and its virtual reality headset business.
The price targets for the company were raised by at least 20 of the 50 brokerages covering the Facebook stock. Raising the price target for the company by 50 percent  over Facebook's Wednesday close, Piper Jaffray was the most bullish as it put the price at $146 target agaist a closing value of $96.99. The median price target is $110.

The investors however were more skeptical about the possible reduction in profits due to the increased spending plans which investors fear could eat into the profits of the company. This sent the stock prices of the company down 1.6 percent to $95.40 in early trading.

The second quarter profits of the company fell by 9 percent after results were announced on Wednesday. Facebook is the the world's largest social network. There have been fears that the ad revenues for the company would see a slow growth for the rest of fiscal.

The company’s however had reason to cheer as the company’s monthly active users hit 1.49 billion globally as of June 30. This was up 13 percent from the similar figures a year earlier.
"We believe the commentary on its face may have raised red flags to some investors, but it may have been misinterpreted as more negative than intended," Piper Jaffray analyst Gene Munster said in a note.

Most of the other analysts were of the opinion that long-term growth can be achieved by the company after the company goes ahead with its investment plans particularly in newer initiatives such as video, photosharing app Instagram and messaging services Facebook Messenger and WhatsApp.

"While newer initiatives may have a less pronounced impact on near-term revenue growth, we believe management's focus on optimizing the user experience will bear significantly more financial fruit long term," said Baird analysts.

Baird raised its price target to $110 from $96.

Wall Street is overwhelmingly bullish on Facebook - only one analyst a "sell" rating on the stock.