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Brokers: Facebook Inc extends "insurmountable lead"

Last updated: 08:56 28 Apr 2016 EDT, First published: 03:56 28 Apr 2016 EDT

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Perhaps forgetting the example of MySpace, broker Wedbush has declared social networking giant Facebook Inc (NASDAQ:FB) has an insurmountable competitive advantage.
 
Results released last night were certainly impressive, and sent the shares up more than 10% in after-hours trading to $120.55, prompting Wedbush to up its price target to $145.
 
“We expect Facebook to continue its rapid growth overseas, and expect it to successfully monetize its under-penetrated Instagram, WhatsApp and Messenger assets over the coming years. Investments in new initiatives position the company for long term growth, and we believe that these initiatives will drive growth over the next decade. In summary, Facebook is a great company, period,” the broker asserted, as it reaffirmed its ‘outperform’ rating.
 
Following a slew of top-line disappointments from beverage makers in the current earnings season, largely as a result of emerging markets not proving as bubbly as expected, first quarter results from Dr Pepper Snapple Group Inc (NYSE:DPS) were “just what the doctor ordered”, according to Jefferies.
 
“DPS has delivered 5% upside to its initial guide during FY13-15, which suggests [earnings per share of] $4.45 (vs. Street $4.33) is very plausible  FY16,” the broker said, as it edged up its full-year (FY) earnings per share (EPS) estimates by around 2% for 2016, 2017 and 2018.
 
The price target has been upped to $101 from $98.
 
 Dr Pepper raised its EPS outlook to the high end of its previously announced $4.20-$4.30 guidance range, which is still likely to prove conservative, in the view of Jefferies. 
 
“DPS has exceeded the midpoint of its initial EPS guidance by c. 5% since 2013, which would suggest that FY16 EPS could ultimately land in the c. $4.45 area (~3% above existing Street est.). We expect Street est. to move by > 1% to the $4.35-$4.40 area, flowing through today's solid beat,” the broker said.
 
Wealth manager Killik remains a fan of payments processor PayPal Holdings Inc (NASDAQ:PYPL) after the company, stretching its wings since being hived off from eBay, released better-than-expected first quarter numbers. 
 
The shares were up about 2.5% at just over $40 in pre-market trading, after it reported a 28% year-on-year increase in EPS to 37 cents, a couple of pennies above the market’s expectations.
 
PayPal ended the quarter with 14 million active merchant accounts, with new signings including Air France, Crate and Barrel, Panera Bread, and Woolworths in Australia, Killik noted.
 
PayPal reckons EPS in the current quarter will be around $0.34-$0.36, in line with expectations, and net revenue growth should come in at 12%-14%, slightly above consensus.
 
 It reiterated full-year guidance for earnings of $1.45-$1.50 and net revenue growth of 14%-16%, both in line with expectations.
 
“PayPal continues to demonstrate strong operational performance, both through expanding the user and merchant base, and through introducing new products and services, such as social payments and cross border remittances. We remain buyers given the long-term investment case of capturing a greater share of e-commerce payments by offering consumers safer and more convenient ways to pay,” Killik said.
 
RBC Capital Markets has downgraded FirstEnergy Corporation (NYSE:FE) to ‘sector perform’ from ‘outperform’ on the Federal Energy Regulatory Commission's (FERC's) effective rejection of the Ohio power purchase agreement (PPA).
 
“We believe FE may likely challenge this order through the court system, but we expect the process could drag out for at least a year or two. While we believe it is possible that the state of Ohio could consider re-regulation of its generation facilities, which would improve FirstEnergy's narrative, time is not on FE’s side,” RBC said, as it trimmed its price target to $33 from $38.
 
“While we like the company's focus on growing its regulated footprint, we see the competitive segment as a drag on the story given the low gas/power price environment,” RBC said, adding that it expects the independent power producer stocks to respond well to the FERC decision, led by Dynegy (NYSE:DYN).

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