Facebook’s Q1 may disappoint, warns Deutsche Bank

Facebook has handily beat Wall Street estimates quarter after quarter. Is the streak in jeopardy? Analysts from Deutsche Bank are warning Facebook may show first-quarter growth slowed when it reports results on April 27.

Next week, Facebook holds F8, its annual conference for software developers in San Francisco.

“Facebook shares are de- servedly flying at all-time highs heading into F8, coming off their best quarter in 2.5 years,” the analysts wrote in a note to investors on Monday. “However, we think investors may have an opportunity to add to positions below current levels after the 1Q results, which may come in light.”

Deutsche Bank expects Facebook advertising revenue to rise 53% year-over-year, slightly below Wall Street consensus. In the prior quarter, Facebook’s ad revenue jumped 57% year-over-year.

“We think investors are extrapolating that the strength from 4Q is secular vs. our view it was well above trend-line and growth rates may revert back lower,” Deutsche Bank says.

As a result, Deutsche Bank expects shares to decline slightly before bouncing back this spring or summer. Still, Deutsche Bank says it sees few other “names” with “as much multiyear revenue runway” as Facebook and urges investors to buy on any weakness.

Deutsche Bank reiterated a buy rating and $145 price target. Facebook closed at $112.22 Tuesday. Shares are up 38% over the past 12 months and have been flirting with all-time highs.

Deutsche Bank says it remains upbeat on Facebook’s long-term prospects, with revenue expected from mobile messaging apps Messenger and WhatsApp and an anticipated increase in ad revenue from Instagram.

“The next few years for Facebook should be strong as revenue moves from the flagship app to multiple areas,” Deutsche Bank analysts said. “We have estimated ( but not yet added to our model) that Messenger and WhatsApp could reach $10 billion combined revenue run rate by 2020.”