In the midst of a global pandemic, some of the world’s largest advertisers said they were boycotting Facebook Inc., which makes almost all of its money from online advertising.
It would be reasonable to believe that this would lead to difficult times for Facebook’s business and stock. However, this didn’t happen after the social media company’s second-quarter earnings report on Thursday afternoon, as Facebook stock instead jumped to record highs on Friday after analysts reported optimistic insights from the report.
“Apparently everything is just great!”
Shmulik tried to explain the seriousness of the situation and the inappropriate response in Facebook’s FB.
Performance, with an analogy.
“Imagine more than 1000 customers pausing their subscriptions. You can’t sell half of your product in a large market or device because you know that users spend less time in your business and the uncertainty of a global one Pandemic persists, “the analyst wrote, maintaining an outperform rating and a $ 285 price target. “And yet Facebook sees 10% [year-over-year, quarter-to-date] Growth and guidance to maintain this level for the third quarter. “
See: Facebook stocks slightly top street view as quarterly results
Evercore ISI analysts described the results as “spectacular” and “breathtaking given the macro background”.
“While the tenor of growth appears uneven in the second quarter, growth rates in the second quarter are likely to peak at 20% year-on-year at their peak,” wrote the analysts, while maintaining an outperform rating and price target of $ 300. “Even taking into account the company’s typical cautious outlook, the models across the street will move much higher.”
According to FactSet tables, more than 20 analysts have shifted their Facebook stock price targets upward due to the gain as stocks rose 8.2% to a record high of $ 253.67 on Friday. As a result of the changes, the analysts’ average price target for Friday rose more than USD 30 from USD 244.35 to USD 275.78.
Facebook’s discovery that advertising revenue had grown steadily by around 10% in July, the month that advertisers sought a boycott, seemed to be the main reason why analysts had little concern about the # StopHateForProfit approach of large advertisers showed. Few believed that advertisers would be away for a long time, according to reports by Facebook boss Mark Zuckerberg.
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“We believe that [the boycott] This is a short-term problem as Facebook has had a strong track record of solving advertiser concerns over the past two years, ”wrote Mizuho analysts while maintaining their buy recommendation and increasing their price target from $ 270 to $ 285 .
Morgan Stanley analysts were slightly concerned that the growth rate was slower than expected, and while they believe the boycott will not last long, they are concerned about the possible impact on stocks.
“The growth in advertising revenue of 10% in July (and the expected growth of 10% in the quarter) is a significant decrease compared to our estimated growth of ~ 15% year-on-year in June. In our view, this is likely due to a greater than expected short-term impact of the boycott and less exposure to Facebook as engagement declines as the level of protection increases, ”wrote the analysts, while maintaining an overweight rating and increasing their price target to $ 285 from $ 270. “While this is only a short-term problem (and we expect boycott advertisers to come back sometime), this flatter recovery tendency combined with IDFA uncertainty can put tactical pressure on stocks in the fourth quarter.”
In the meantime, Facebook has continued to grow due to an increase in advertising from small e-commerce companies and video games, analysts said. In other words, all of these ads that users see for masks and mobile games are paying off for Facebook.
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Mark Mahaney, an analyst at RBC Capital Markets, attributed “opportunistic gaming and e-commerce advertisers” [taking] Advantage of depressed pricing ”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 raised their price targets and Facebook financial estimates, there have been no significant changes in ratings, probably because so many analysts are already viewing the stock as a buy. Out of 47 Facebook analysts tracked by FactSet, 39 consider the stock to be a buy equivalent, six a hold, and only two a sell.