Facebook Posts Surprising Growth
But even after raising our fair value estimate, we think the shares are fairly valued.
Facebook's (FB) ad revenue growth and increasing engagement continue to surprise us, particularly as the Internet behemoth takes slow and calculated steps in launching advertising on other platforms such as Instagram and WhatsApp. We have underappreciated the near-term growth potential, and we are increasing our fair value estimate to account for more robust near-term revenue growth.
Expense growth continues to outpace revenue growth, as management forecast, but some products, such as WhatsApp and Oculus, remain in the incubation stage, while others like Instagram have only begun to tap their revenue potential. We reiterate our wide economic moat rating and consider the shares fairly valued at this time.
Rick Summer does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.