April 26, 2018 / 3:14 PM / 25 days ago

Results soothe nerves over scandal-hit Facebook

(Reuters) - Shares of Facebook Inc rose as much as 8.5 percent on Thursday morning after another blockbuster set of quarterly results calmed stock investors’ nerves about the fallout of the Cambridge Analytica privacy scandal.

FILE PHOTO: A figurine is seen in front of the Facebook logo in this illustration taken, March 20, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

Before the results on Wednesday evening, the row over the improper sharing of data had knocked 13 percent, or more than $70 billion, off the market value of the world’s biggest social network.

The first quarter numbers showed Facebook’s quarterly profit rose 63 percent, and revenue 49 percent, beating already upbeat analysts’ estimates on the back of growing ad sales.

“Facebook’s ad unit innovation, investment and focus on bringing new advertisers to the platform are driving this,” Morgan Stanley analyst Brian Nowak said.

“This, to us, speaks to how Facebook (and Google, for that matter) can continue to post outsized ad growth and earnings power for years to come.”

Monthly active users also rose 13 percent to 2.2 billion, quashing worries that the data scandal and the launch of a #DeleteFacebook tag would lead to users leaving the social network.

As with Google parent Alphabet earlier this week, however, Facebook is also spending more to make data on its platform more secure. It said expenses this year will grow between 50 percent and 60 percent, up from a prior range of 45 percent to 60 percent.

Initially, at least, investors were judging that a sensible move rather than a big threat to the company’s bottom line.

“We believe this is a prudent move to secure the stabilization of user engagement, advertiser confidence and government relations,” Mizuho Securities analyst James Lee said.

At least eight brokerages raised their price targets on Facebook stock, while one cut its price on the stock.

Mizuho’s Lee was most bullish with a price target of $255. Facebook’s mean price target was $216.87 versus the $173 it was trading at on Thursday.

Barclays analyst lowered his price target on the stock to $190 from $225, saying he expects more tape-bombs in 2018 before sentiment eventually improves.

“We don’t think (the) first quarter marks the “all clear” for Facebook shares by any means, but given the drubbing over the past two months, we think it may start an overdue stabilization period,” Sandler wrote in a client note titled “Senator, we run ads.”

Reporting by Supantha Mukherjee in Bengaluru; editing by Patrick Graham

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