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[b]RBC Note on $FB
Reiterate Outperform:[/b]43% ex-FX Ad Revenue growth and 51% Adjusted EBITDA growthon a $48B revenue run rate. We still think FB is the Best Growth Storyin Tech. And we believe that’s FB’s current low market shares – less than 20%of Global Online Advertising & mid-single-digit % of Global Total Advertising will help it maintain premium growth for a long time. And FB still has several new large revenue growth drivers (Instagram monetization, Messaging Platform monetization, Camera/AR, AI and Video). On valuation, we view 17x P/E on our‘19E GAAP EPS (15X P/E ex-cash) as highly reasonable.
FB reported a very strong Q1, with results coming in well ahead of expectationsand growth trends remaining very impressive. FB tightened up its OpEx growthfor 2018 from 45%-60% to 50%-60% (for platform security), but suggested thatGDPR is unlikely to impact Ad revenue growth. Estimates not materially changed.PT remains $250. Outperform.
• Strong Q1 Results: Revenue grew 42% Y/Y ex-FX to $11.97B vs. RBC/Stree testimates of $11.56/11.41B. Ad Revenue growth ex-FX deceled from 44% in Q4to 43% in Q1 – very impressive.
Strength came from all geos, ad units & verticals,tho Instagram monetization ramp and improved ad targeting clearly helped. EPS easily beat expectations at $1.69 vs. RBC/Street @ $1.28/$1.35, due to Revenue Upside and Opex Management. All in, Q1 fundamentals were very impressive –very consistent and premium growth with very high Operating Margin
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