Facebook is not only a Goliath in its industry, but in the early innings of its growth story and monetization potential. It is anything but a mature business and if Left had studied its most recent results, he would have seen a company that has not only defied investor skepticism over the past four years, but proven adept at growing consistently, rapidly and profitably. We like visibility. Our $145-a-share price target reflects 30x next year's EPS (we view $4.80 a share as fair) which, considering the 40% year- over-year growth, implies a price-to-earnings-growth (PEG) multiple of 0.75x, which would still be the lowest across the entire large-cap tech space.
Recently, the stock received some support from analysts at Morgan Stanley, who reiterated their Buy rating and noted that the recent selloff was overdone. However, the conviction was half-baked as the analysts trimmed their estimates on decelerating paid-search revenues, a common theme from the sell side of late. We recognize that this could be an issue in the short term, but still love the long-term story and do not want to underestimate CFO Ruth Porat and her ability to win over investors. We continue to like Alphabet because it sells at roughly only 20x earnings and it remains a household name with a huge cash position and lots of opportunities (those "Other Bets") and a huge growth engine in YouTube. We reiterate our $900 long-term price target.