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Facebook is as dominant in advertising as IBM was in computing a generation ago, Deutsche Bank says

  • Deutsche Bank reiterates its buy rating for Facebook shares, predicting the social media giant will report sales above expectations next year.
  • "Facebook is the new IBM (in a good way). Just as the saying went that 'nobody got fired for buying IBM' in enterprise tech, we think FB is growing into a similar position in advertising," the firm's analyst writes.
Mark Zuckerberg, chief executive officer and founder of Facebook
David Paul Morris | Bloomberg | Getty Images
Mark Zuckerberg, chief executive officer and founder of Facebook

Facebook is now as dominant in advertising as IBM was in the corporate technology market a generation ago, according to one Wall Street firm.

Deutsche Bank reiterated its buy rating for Facebook shares, predicting the social media giant will report sales above expectations next year.

"Facebook is the new IBM (in a good way). Just as the saying went that 'nobody got fired for buying IBM' in enterprise tech, we think FB is growing into a similar position in advertising, with best-in-class ad systems (targeting, creative and attribution); a large growing audience across numerous products; and a well-oiled sales machine," analyst Lloyd Walmsley wrote in a note to clients Thursday.

"We see Facebook as having the most upside to estimates over the next 6-12 months and our favorite name among the large cap Internet space."

Facebook shares was fractionally higher Thursday.

Walmsley raised his price target for the company to $220 from $215, representing 31 percent upside to Wednesday's close.

He said discussions with ad agency executives revealed strength in spending for Facebook ads.

"Our recent ad conversations point to continued growth in same client spend, some noting an acceleration in 3Q relative to 2Q (with particular strength in July)," he wrote. "While the important September month is not closed the breadth of positivity makes us comfortable increasing our estimates nonetheless."

Walmsley raised his 2018 Facebook revenue forecast to $52.2 billion from $50.5 billion versus the $50.7 billion Wall Street consensus.

The company's shares have rallied 45.8 percent this year through Wednesday, compared with the market's 12 percent gain. But the stock is down 2.5 percent this month compared with the S&P 500's 1.4 percent gain.