Raymond James has upgraded Facebook Inc (NASDAQ:FB) to “Strong Buy” from “Outperform” with a price target of $160. Aaron Kessler, the Analyst reported that they have upgraded Facebook stock to Strong Buy given its strong performance in last quarter and continued momentum in same period.

They consider the company can continue to post upside to consensus projections in 2017 despite some discussion around expense growth and ad load growth. Also, the risk/reward remains attractive with stock trading at ~24x/19x of 2016/2017 non-GAAP EPS versus expected 25% EPS CAGR.

The details

Kessler further details on expense guidance, stating that they consider Street projections, which call for around 41% operating expense increase, are reasonable. Over the last 3 years, Facebook posted growth of around 7.5%, 9% and 8.5% in terms of non-GAAP operating expense that clearly was below original guidance. Analysts have revised expense growth slightly for FY2017 though it still remains below consensus.

Lastly, Kessler stated that depending on proprietary checks they remain comfortable with the fourth quarter ad revenue projections $8.2 billion to $8.3 billion or 45% to 47% YoY growth. Facebook has outpaced the NASDAQ index. The fundamentals and earnings have been enhancing consistently in the past years. Depending on current market situation, and the existing growth rate of company’s earnings performance, the stock price will probably appreciate even further.

Since 2013, Facebook has been outperforming its peer tech stocks. Its book value is currently at $18.84 i.e. it tripled in total against to the book value in 2012. The RoE has been refining as well and is now solid at 15.8%.

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Facebook P/E ratio has been dropping since the start of 2016. Presently, it is at 49.5 which appears high, but shareholders have even paid higher P/E for this stock. It is remarkable to note the that despite of the high appreciation in its shares price, the P/E ratio dropped in the past months. This shows the strong growth in earnings.