Facebook analysts: Keep calm and your shares

SAN FRANCISCO — Wall Street analysts have some advice for jittery Facebook investors: Keep calm and your shares.

Facebook dropped a bombshell on investors during a third-quarter earnings call on Wednesday: Advertising revenue growth would "come down meaningfully" next year as Facebook reduces its "ad load," the number of ads it shows users in their News Feed.

Facebook shares (FB) slid 5% on Thursday, wiping out billions in market value.

Pivotal Research Group analyst Brian Wieser says the market reaction was "unnecessarily negative."

"We note that consensus estimates and our own already anticipated this trend. 2016 growth rates represented an unsustainable acceleration that we think few expected would continue," Wieser said in a research note.

CFRA analyst Scott Kessler says he's keeping a “buy” rating on the stock and is maintaining his 12-month price target of $155.

"Facebook sees a 'much smaller contribution' to growth from ad load (i.e., number of ads) and 'aggressive investment' in 2017," Kessler wrote in a research note. "We still see strong growth and an attractive valuation."

Facebook has averaged about 50% revenue growth in advertising. Increasing the ad load had been one of three major drivers, along with user growth and increased time spent on the social-media service.

"Ad load will play a less significant factor driving revenue growth after mid-2017," Facebook's chief financial officer David Wehner said during a conference call with analysts.

Wehner also warned that company spending would accelerate in 2017. "We anticipate 2017 will be an aggressive investment year," both in terms of adding more employees and expanding data centers, he said.

JMP Securities analyst Ron Josey reiterated his "market outperform" rating and $165 price target.

"We already took into account the expected change in ad load growth in our projections, and based on our view that Facebook’s multiple opportunities across its 10+ year strategic plan likely require significant investment, we believe increasing investments is the right thing to do," Josey wrote in a research note. "As a result, we would take advantage of any dislocation in shares, acknowledging Facebook may trade sideways until the company provides additional details around its 2017 expense guidance, which is most likely during (fourth-quarter) earnings."

Wehner said Facebook has other levers it can pull to increase revenue, such as increasing the time users spend on the platform.

Still, the warning put a significant damper on Facebook's estimates-topping third quarter.

Net income tripled to $2.38 billion from $896 million a year earlier. Excluding certain expenses, Facebook reported earnings per share of $1.09, up from 57 cents a year earlier. Analysts had expected a profit of 97 cents.

Revenue rose 56% to $7.01 billion in the third quarter, beating estimates of $6.9 billion. Facebook has increased sales by more than 50% the past four quarters.

Facebook reported third-quarter earnings on Wednesday after the markets closed. Facebook shares closed down 2% to $127.17 in regular trading.

"We believe this quarter’s commentary was meant to reiterate prior quarter remarks, as opposed to signaling additional conservatism, something our follow-up conversation with management seemed to support," Evercore analyst Ken Sena wrote in a research note. "We feel very good about Facebook shares and view this most recent dip as providing a renewed buying opportunity."