Analysts Hail Blowout Earnings, But This Is Why Facebook Is Down

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Facebook ( FB ) scored multiple price-target hikes Thursday following its quarterly earnings report that blew past estimates, but the stock fell on concerns of higher spending.

[ibd-display-video id=2489131 width=50 float=left autostart=true]Facebook reported third-quarter results after the market close Wednesday that beat views , and initially sent shares higher in after-market trading Wednesday. But shares later fell as Facebook disclosed plans for increased spending.

Facebook shares were down 2.7%, near 178.40 during morning trading in the stock market today .

Analyst expressed concerns about elevated investments as Facebook committed to improve security on its platform, following congressional hearings over two days this week about the role Facebook, Google ( GOOGL ) and Twitter ( TWTR ) played in Russia's misinformation campaign during the U.S. presidential campaign.

"I've expressed how upset I am that the Russians used our tools to sow mistrust," Facebook Chief Executive Mark Zuckerberg said during a conference call with analysts to discuss the earnings report. Zuckerberg said that profits will probably be affected by the amount of money it will spend fighting abuse of its platform. Facebook said it plans to double the number of content reviewers it employs, to 20,000. It will also boost spending on video content and other long-term initiatives.

"We take foreign meddling in U.S. elections very seriously," wrote RBC Capital Markets analyst Mark Mahaney in a note to clients. "Call it what it is - political warfare. And countering will, and should, raise the cost of doing business for Facebook." Nevertheless, Mahaney wrote, Facebook's core business is 'inherently extremely impressive." Mahaney raised his price target on Facebook to 230 from 195 and maintained an outperform rating.

"We still think Facebook is the best growth story in tech. And Facebook still has several new large revenue growth drivers," including Instagram, Messenger, WhatsApp and video, Mahaney wrote.

Wells Fargo Securities analyst Ken Sena weighed in on Facebook's intent to boost spending, saying in a note that "we feel confident that despite our reduced margin assumptions estimates can still move higher as these newer investment areas become better understood."

Sena maintained an outperform rating on Facebook and price target of 215.

IBD'S TAKE:Facebook is an IBD Leaderboard stock with an IBD composite rating of 99 out of a possible 99.Check out IBD'sTech Leadersfeature to get a broader idea on top tech stocks. H ere's a simple routine to help you understand how to invest in the stock market .

Jefferies analyst Brent Thil raised his price target on Facebook to 225 from 215.

"Facebook remains our top large-cap internet pick and we think that momentum can continue through the end of the year," Thill wrote in his note. "Facebook is growing nearly two times the rate of its large-cap internet peers while delivering 50%+ operating margins and the stock is up nearly 59% year to date."

Needham analyst Laura Martin raised her price target on Facebook to 215 from 185 and maintained a buy rating.

"We are buyers of Facebook on weakness based on Facebook's mobile monopoly, scale benefits to ad targeting, margin expansion, and multisite optionality," Martin wrote in her note. "We believe that digital aggregators are 'winner-take-most' and Facebook is the winner on mobile."

The Facebook price targets ranged from 195 to 230.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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