Facebook Inc. (NASDAQ:FB) Spending Plans Get a Nod of Approval from Analysts

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By Jessica Schultz on October 29, 2014 Social Media

Facebook Inc. (NASDAQ:FB) does not bring its investors any good news with its third quarter results; the company announces huge increase in spending.

Facebook Inc.’s (NASDAQ:FB) spending plans did win over analysts who now sound even more optimistic about the company’s future growth over long-term and its dominance as a social networking platform in the world.

After the company announced its results for the third quarter, some analysts gave the Facebook Inc. (NASDAQ:FB) stock a Buy rating. Almost 12 analysts reduced the stock’s price target to $78, which is a decline by $8 from its previous value. The main reason for this cut down was the Facebook Inc.’s (NASDAQ:FB) revenue and expense report.

Securities analysts from JP Morgan believe that this was yet another strong quarter for Facebook Inc. (NASDAQ:FB); they believe that the company holds a very strong position in the internet and ever increasing mobile market. The expanding plans reported by Facebook Inc. (NASDAQ:FB) are being seen as investment opportunities for further growth and strength of the company. The JP Morgan analysts gave Facebook Inc. (NASDAQ:FB) a rating of Overweight and $85 price target, which came down from its previous value of $90.

The Facebook Inc. (NASDAQ:FB) stock is covered by 44 analysts; out of this number 15 analysts have given the stock a rating of “Strong Buy,” whereas 7 rated it “Hold” and 22 have it at “Buy”. The stock does not have a “Sell” rating by any of these 44 analysts.

Facebook Inc. (NASDAQ:FB) is not the only stock to have its share price reduced; this has become somewhat of a trend for this quarter. Netflix, Google (NASDAQ:GOOGL), Amazon.com Inc, (NASDAQ:AMZN) and eBay also disappointed their investors and suffered a fall in their share price. However the good news is that most of these stocks recovered their value fairly quickly.

Mark Mahaney an analyst at RBC Capital Markets says that most of the stocks showed quick recovery after their share value dipped following their third quarter results and adjusted EPS. Google Inc. (NASDAQ:GOOGL) and eBay went up by 7%; whereas Netflix and Amazon.com (NASDAQ:AMZN) went up by 16% and 4% respectively.

Revenue for Facebook Inc. (NASDAQ:FB) in its third quarter beat estimates; the company however has announced an increase between 55 and 75% in spending (investments) for the year 2015, which is likely to affect its short-term profit. In this year’s first three quarters Facebook Inc. (NASDAQ:FB)’s expenses went up by 32%.

Analysts at Pivotal Research have given the Facebook Inc. (NASDAQ:FB) stock a rating of “Buy” and believe that the announced increase in spending will help the company maintain and increase its dominance in the cyber world.

Facebook Inc. (NASDAQ:FB) has already made some huge investments in acquisitions such as WhatsApp, Oculus and Instagram purchases.

Piper Jaffray’s Gene Munster of Piper Jaffray believes that the coming six or eight quarter for Facebook Inc. (NASDAQ:FB) are going to bring long-term growth to the company whereas its short-term profits will definitely take a hit.

Even though these spending expenses have impressed analysts, but investors have become skeptical because of short-term profit reductions, which are likely to result from company’s future investments.