Facebook spending gets thumbs up from analysts - if not investors

Wed Oct 29, 2014 9:45am EDT
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By Tenzin Pema and Supantha Mukherjee

(Reuters) - Another day, another quarterly report from a technology company that disappointed investors.

Facebook Inc's shares fell as much as 7.4 percent to $74.78 in early trading on Wednesday, a day after the company revealed aggressive spending plans for 2015.

But analysts were taking a more upbeat view, saying the heavy spending will drive long-term growth and reinforce the social networking giant's market dominance.

No brokerages cut their recommendation on the company following the release of its third-quarter results, and several said the price decline represented a buying opportunity.

At least 15 brokerages cut their price targets on the stock, by as much as $8 to as low as $78, mainly to reflect the company's expense and revenue outlook.

"FB delivered another strong quarter and is very well-positioned in an increasingly mobile and social internet landscape, and to be clear, FB is investing into strength and future growth opportunities," JP Morgan Securities analysts said in a research note. JP Morgan rates Facebook "overweight", with a price target of $85, down from $90.

Of 44 analysts covering the stock, 15 rate it a "strong buy," 22 a "buy" and seven a "hold." Nobody rates the stock a "sell", according to Thomson Reuters data.

The drop in Facebook's share price follows a now-familiar script this corporate reporting season.   Continued...

People are silhouetted as they pose with mobile devices in front of a screen projected with a Facebook logo, in this picture illustration taken in Zenica October 29, 2014. REUTERS/Dado Ruvic