It would be reasonable to think that this would lead to difficult times for Facebook’s activities and actions. But that’s not what happened after the social media company’s second quarter earnings report on Thursday afternoon, as Facebook shares instead hit record highs on Friday after Analysts reported optimistic findings from the report.
Shmulik tried to explain the gravity of the situation and the incongruous response from Facebook’s FB,
performance, with an analogy.
“Imagine over 1000 customers suspending their subscriptions, you can’t sell half of your product in a major market or on a certain device knowing that users will spend less time in your store and the uncertainty of a global pandemic The analyst wrote. while maintaining an outperformance rating and price target of $ 285. “And yet, Facebook sees a 10% [year-over-year, quarter-to-date] growth and guide to maintain this level for the third quarter. “
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Evercore ISI analysts described the results as “spectacular” and “astonishing in light of the macroeconomic context”.
“While the content of growth in 2Q seems uneven, at their peak 2Q growth rates have likely approached 20% year-on-year,” analysts wrote, while maintaining an outperformance rating and price target. of $ 300. “Even taking into account the typical cautious outlook for the company, models across the street will move significantly higher.”
More than 20 analysts raised their price targets on Facebook stock due to earnings, according to FactSet charts, as stocks rose 8.2% to a record closing high of $ 253.67 on Friday . The changes pushed the analysts’ average price target over $ 30 higher on Friday, to $ 275.78 from $ 244.35.
Facebook’s revelation that ad revenue was growing steadily by around 10% in July, the month advertisers had targeted for a broad boycott, seemed to be the main reason analysts showed little concern with the #StopHateForProfit approach. major advertisers. Few thought advertisers would stay away for long, as Facebook chief executive Mark Zuckerberg reported.
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“We believe this [the boycott] is a short-term issue, as Facebook has a solid track record of solving advertiser issues over the past two years, ”Mizuho analysts wrote while maintaining a buy rating and raising their price target to $ 285 versus $ 270.
Morgan Stanley analysts were slightly worried the growth rate would be lower than expected, and while they also believe the boycott won’t last long, are concerned about a possible effect on stocks.
“The 10% growth in advertising revenue in July (and expected 10% in the quarter) is a significant decline from our estimated annual growth of around 15% in June. In our mind, this is probably due to a larger than expected short-term impact of the boycott and lower engagement on Facebook as engagement declines compared to skyrocketing shelter levels, ”wrote analysts, while maintaining an overweight rating and increasing their price target. at $ 285 starting at $ 270. “While this is only a short-term problem (and we expect boycott announcers to return eventually), this flatter recovery slope combined with the uncertainty of the IDFA in the 4th quarter can create tactical pressure on stocks.
Meanwhile, Facebook has managed to continue to grow due to an increase in advertisements from small e-commerce and video game companies, analysts noted. In other words, all of those ads that users see for masks and mobile games are paying off for Facebook.
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RBC Capital Markets analyst Mark Mahaney gave credit to “opportunistic game and e-commerce advertisers [taking] depressed price advantage ”, and wrote that while“ online advertising has been negatively impacted by COVID,… Facebook has proven to be the “most resilient net advertiser”.
While many analysts have increased their price targets and financial estimates for Facebook, there haven’t been any major changes in the ratings, likely because many analysts are already viewing the stock as a buy. Of 47 analysts covering Facebook followed by FactSet, 39 see the stock as equivalent to a buy, while six rate it as a take and only two rate the stock as a sell.