Neither a devastating pandemic, an economic meltdown, nor an antitrust lawsuit from the Federal Trade Commission have dented the social media giant's momentum.
The choice of investors based on 10 million advertisers
Investor choice for Facebook is strongly rooted in sales to over 10 million advertisers and a thriving digital economy that grew during the pandemic, as well as diversification into new product categories such as Instagram Reels and Facebook Shop.
To be sure, there is also no shortage of worries. Antitrust and political risk remain acute, especially in light of the January 6 assault on the US Capitol and the role of social media in helping fuel the uprising.
The commitment of Facebook and other social media giants like Twitter Inc. (TWTR) also persists to crack down on disinformation and hate speech flowing on their digital platforms.
Facebook also faces a decrease in the time spent on the site by users in the United States, where the average length of visits and visits themselves are decreasing, according to the analysis agency SimilarWeb.
However, investors are expecting big earnings in the fourth quarter and beyond, after the stock rose 33% in 2020 to push Facebook's market cap close to $ 800 billion. Analysts expect Facebook's revenue and profits to grow nearly 25% on average in the fourth quarter, according to FactSet.
What analysts think
At $ 777,2 billion, Facebook's market value is higher than that of media giants Walt Disney Co. (DIS) and Comcast Corp. (CMCSA) combined. "We estimate that Facebook's fourth quarter total revenue will grow 28% year-on-year to $ 27 billion, which is moderately above the FactSet consensus of $ 26,27 billion and represents a notable acceleration," he said. Stifel analyst John Egbert, in reiterating a buy rating and a price target of $ 340 on January 22.
“We expect vertical integration for e-commerce and more server-to-server integrations for advertising to foster a narrative on Facebook that has more control over its revenue destiny,” said BMO Capital Markets analyst. Daniel Salmon, upping his rating to outperform and the $ 325 price target from $ 270 on January 19th.
“Investor fatigue around Facebook is greater than the rest of the FANGs, partly due to high regulatory concerns and also because FB has less business diversification than Google (GOOGL, GOOG) and Amazon (Amazon shares - ticker AMZN).
Lawsuits from the FTC and state AGs will now be heard by the same judge and could consolidate. Although there is no news on the expected dates for the legal process, we continue to believe that the dissolution of the acquisitions of Instagram (2012) and WhatsApp (2014) is highly unlikely, ”said JP Morgan analyst Doug Anmuth, while maintaining a rising ratings and a target price of $ 330 on January 19.
