"Facebook has been highly profitable since its IPO in 2012 and we believe despite higher near term spending, Facebook can maintain above average profitability through the acquisition and development of additional products and brands," Hilliard Lyons analyst Steven Turner wrote in the firm's note.
The firm's bullish position accounts for 2015 as a "significant investment year" for Facebook, per the cautionary guidance provided by CFO Dave Wehner during Facebook's third-quarter earnings conference call. Wall Street initially reacted with panic to news that the company would increase its 2015 spending between 55% and 75% over 2014. Shares remain about 7.5% depressed from prices before the third-quarter report spooked investors.
But Hilliard Lyons eyes future profits from Facebook's Atlas ad platform and LiveRail video advertising network, which the company acquired in July, and notes the company's purchases of WhatsApp, Instagram, and Oculus.
Long term, Hilliard Lyons expects Facebook to cruise over 2015 spending hump and grow revenue in 2016 by 33% to $21.80 billion with earnings per share growth of 35% to $2.33.
The calculations take into consideration the social network's prosperous mobile advertising business and its future prospects on that front. Specifically, the firm is anticipating Facebook to grow its average revenue per user -- up 40% year-over-year to $2.40 in the third quarter -- with help from what it views as a mobile advertising magic bullet: Facebook Audience Network, which lets advertisers distribute their highly targeted ads to people in non-Facebook mobile applications.
"Not only do we expect this to be powerful due to Facebook's network effect, but also because of the ad targeting potential Facebook can provide third party apps from the treasure trove of personal data archived within user profiles," Turner said.
Facebook finished its third quarter with revenue of $3.2 billion and adjusted earnings per share of 42 cents. Wall Street is looking for $3.78 billion in revenue from the current quarter, according to Thomson Reuters, though Hilliard Lyon's estimation is slightly less at $3.74 billion. The firm, however, is more bullish on the year ahead than the consensus. Its $92 12-month price target is more than 4% greater than the median price target of $88.
Facebook shares closed at $74.34 on Tuesday, up around a tenth of a percent for the day.
--Written by Jennifer Van Grove in New York, NY.
>Contact by Email.