Facebook Inc (NASDAQ:FB)’s stock has been downgraded to ‘Neutral’ from ‘Buy’ at Janney Montgomerry Scott LLC today. The Pennsylvania based asset management company had been covering the social media website as a ‘Buy’ since last August. Tony Wible, Janney’s Media and Entertainment Analyst, spoke about this recent development on CNBC’s Squawk Road Map.
“The company is going to have to work into its valuations,” Wible said referring to Facebook Inc (NASDAQ:FB)’s growth deceleration from a 60 % growth rate to 35 % growth rate. He also noted that this downward trend raised concerns about the company’s valuation in 2015. Though the growth numbers are disheartening, he put the price target at $82.50. He mentioned that this was similar to the events witnessed when Google Inc (NASDAQ:GOOGL) went public and the value of stocks seemed to stall over a period of time.
Wible mentioned that Facebook Inc (NASDAQ:FB) had tremendous growth potential in the mobile ad market. Its recent acquisitions such as Instagram will be able to put Facebook on top of the video advertising leaderboard. He also added that payments could hold the key to Facebook’s future.
“Payments is the one thing I think that is under appreciated, a lot of the other things such as search, Instagram [and]WhatsApp have been discussed ad nauseam,” he explained.
However, he was quick to note that monetary realization from payments is not something that happens overnight. Facebook will have to wait for at least a year to appreciate it payments opportunity.
Wible stated that the growth in Facebook Inc (NASDAQ:FB)’s revenue is not being reflected in its stock price. Facebook’s previous quarter results that were announced late July beat analyst estimates. The company posted a revenue of $2.90 billion, which was higher than the market consensus of $2.80 billion. Its revenue was up by 60.5 % compared to last year. Their earnings per share were also on the higher side at $0.42 per share as opposed to the market estimate of $0.32 cents per share.