Amongst the FAANG family, you could argue that Facebook (FB) generates the most negative publicity. Hardly a week goes by without reports of a new FB crisis. From ad boycotts and data breaches to dissent among execs, news feeds boast a constant stream of Facebook PR gaffes.
However, blocking out the noise, Tigress Financial analyst Ivan Feinseth reminds investors that Facebook is and will continue to be a force to be reckoned with.
Facebook’s ever-expanding universe shows no signs of slowing down. Over 3.1 billion people use one of FB’s products monthly and “180 million businesses use Facebook to stay connected with customers.” The platform also boasts over 9 million active advertisers.
And while many companies have suffered at the hands of COVID-19, the pandemic has provided Facebook with additional business.
“FB saw a significant increase in its number of users, driven by ongoing work, learn, and entertain at-home trends due to the COVID19 pandemic across all products and all regions,” Feinseth said.
The numbers don’t lie. In Q2, MAUs (Monthly Active Users) grew by 11.9% year-over-year to 2.701 billion. DAUs (Daily Active Users) saw a 12.5% year-over-year uptick, hitting 1.785 billion and accounting for 66% of MAUs.
The social media giant is adding new services too, as evidenced by the move into retail with Facebook Shops.
Shops “makes it easy for businesses to set up a single online store with access to both Facebook and Instagram.” Feinseth explained, “The platform is free and easy to use, and businesses can upload their catalog of products and services as well as customize the look and feel of their online storefront.”
There are many more reasons to believe Facebook will keep on growing, in Feinseth’s opinion. He highlights the company’s international expansion with the $5.7 billion investment in India’s Reliance Jio Internet platform, the newly launched TikTok-like Instagram Reels, expanded gaming capabilities with the addition of gaming production studio BeatGames, Facebook Dating, Facebook News, and Facebook Share, along with Instagram Shopping and WhatsApp Payments.
Add in $55 billion worth of excess cash, enough to fund “strategic acquisitions, and enhance shareholder returns through ongoing share repurchases,” and you get the sense that the negative news items roll off Facebook like water off a duck’s back.
Unsurprisingly, then, Feinseth reiterates a Strong Buy rating on FB shares, without suggesting a price target. (To watch Feinseth’s track record, click here)
The analyst consensus also rates Facebook a Strong Buy. The breakdown consists of 30 Buys, 4 Holds and 1 Sell. However, FB shares have added 20% in the last month alone, and with the current $302.50 average price target, the Street expects shares to dip 3.5% from current levels. (See FB stock analysis on TipRanks)
To find good ideas for tech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
One of the year’s hottest non-Covid topics has been the rise of Gen Z’s app of choice, TikTok. The Chinese video-sharing app has been grabbing headlines left and right, with it trolling Trump’s reelection campaign as well as facing a US ban over concerns it is a threat to national security.
Not one to miss an opportunity to ride the latest trend, Facebook (FB)-owned Instagram recently launched what appears to be its own version of TikTok, calling it Instagram Reels.
Deutsche Bank analyst Lloyd Walmsley ponders the impact of the latest addition to the Facebook arsenal.
“We think the introduction of Instagram Reels is a nice potential positive around engagement, at least some of which we would think of as incremental, on what should be a highly monetizable surface. In addition, we see Reels as a nice defensive move to help retain usage that might have otherwise shifted to TikTok,” the 5-star analyst opined.
Walmsley assumes that just “a modest increase in time spent at healthy ad loads and monetization,” could provide Instagram with an 18% revenue increase and a 6% uptick for FB ad revenue.
As expected, then, it is all about the advertising opportunity. So, the question is, can Reels be better monetized than Stories or Newsfeed? In contrast to both of these features where sound is used 60-70% of the time, Walmsley, not unreasonably, anticipates Reels’ sound will be used almost 100% of the time. This potentially means higher engagement and “longer dwell time on ads,” resulting in higher ad prices.
“Ad pricing is largely a function of click-through-rate and ultimate downstream conversion,” Walmsley said. “And while we do not make any specific assumptions here, we ultimately think this format can likely drive more influence on ultimate conversion activity, resulting in higher effective ad prices.”
To this end, Walmsley keeps a Buy rating on FB shares, while his $305 price target implies a modest 3% upside from current levels. (To watch Walmsley’s track record, click here)
All in all, Facebook remains a firm favorite on Wall Street. FB's Strong Buy consensus rating is based on 30 Buys, 4 Holds and 1 lone Sell. However, with a year-to-date uptick of 44%, the $291.71 average price target indicates shares could stay range bound for now. (See Facebook stock-price forecast on TipRanks)
To find good ideas for tech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.