Amid a global pandemic, some of the world’s largest advertisers said they would boycott Facebook Inc., which makes almost all of its money from online advertising.
It would be wise to think that this would lead to difficult times for Facebook’s business and stocks. However, this is not what happened after the news of the social media company’s revenues was released on the fourth afternoon on Thursday afternoon, as Facebook shares instead jumped to record highs on Friday, when analysts announced optimistic expressions from the report.
“Everything seems great!”; Written by Bernstein analyst Mark Shmulik.
Shmulik tried to explain the seriousness of the situation and the incorrect reaction in FB Facebook,
performance, with analogy.
“Imagine that more than 1,000 customers suspend their subscriptions, you can’t sell half of your product in a major market or on a specific device because we know users will spend less time in your store and the uncertainty of a global pandemic,” said the analyst. while maintaining a better rating and a price target of $ 285. “And yet Facebook sees 10% [year-over-year, quarter-to-date] and instructions for maintaining this level for Q3. “
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Evercore ISI analysts described the results as “spectacular” and “stunning in the light of the macro environment.”
“Although the tenor of growth in 2Q appears uneven, the growth rate in 2Q is likely to have peaked at 20% year-on-year,” analysts wrote, maintaining an above-average rating and a $ 300 price target. “Even if we take into account the company’s typical cautious outlook, the models will move significantly higher across the streets.”
More than 20 analysts have pushed their price targets on Facebook stocks higher due to earnings, according to FactSet tables, when stocks rose 8.2% to a record high of $ 253.67 on Friday. The changes moved analysts’ average price target by more than $ 30 on Friday to $ 275.78 from $ 244.35.
Facebook’s revelation that advertising revenue grew steadily by about 10% in July, in a month in which advertisers focused on a widespread boycott, seemed to be the main reason why analysts expressed little concern about large advertisers’ #StopHateForProfit approach. Few believed that advertisers would stay within reach for a long time, as Facebook CEO Mark Zuckerberg reportedly said.
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“We believe that [the boycott] is a short-term problem because Facebook has strong experience solving advertisers’ problems over the past two years, “Mizuho analysts wrote while maintaining the purchase rating and raising the price target to $ 285 from $ 270.
Morgan Stanley analysts were slightly worried that growth rates were slower than expected, and although they also believe that the boycott will not last long, they fear a possible impact on stocks.
“Advertising revenue growth of 10% in July (and expected 10% this quarter) is a remarkable step from our estimated ~ 15% y / y growth in June. In our opinion, this is probably due to the greater than expected short-term impact of the boycott and lower exposure to Facebook, as exposure is declining from sharp hiding places, “write analysts, while maintaining an overweight rating and raising their price target. at $ 285 out of $ 270. “While this is only a short-term problem (and we expect boycott advertisers to eventually return), this flatter recovery trend, along with IDFA uncertainty in 4Q, could put tactical pressure on stocks.”
Meanwhile, Facebook has continued to grow thanks to a jump in the ads of small e-commerce companies and video games, analysts said. In other words, all these ads that users see for masks and mobile games pay off for Facebook.
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RBC Capital Markets analyst Mark Mahaney praises “opportunistic advertisers in gambling and e-commerce [taking] the advantage of reduced pricing, “he wrote, while” COVID has a negative impact on online advertising, … Facebook has proven to be the most resilient “pure advertiser.”
While many analysts have raised their pricing targets and financial estimates for Facebook, there have been no major changes in ratings, probably because so many analysts are already considering buying a stock. Of the 47 analysts covering Facebook tracked by FactSet, 39 consider the stock to be the equivalent of a purchase, while six have marked it as suspended and only two rate it as a sale.