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Facebook Is 'Too Cheap To Ignore,' Stifel Says In Upgrade

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Facebook Is 'Too Cheap To Ignore,' Stifel Says In Upgrade

Facebook, Inc. (NASDAQ: FB) investors have valid reasons to remain concerned with fatigue among users in its core social media platform, but at the same time the stock is "too cheap to ignore," according to Stifel.

The Analyst

Stifel's Scott Devitt upgraded Facebook from Hold to Buy with a price target lifted from $175 to $202.

The Thesis

Ongoing concerns related to fatigue on Facebook's core platform and possible regulatory actions at the government level takes a backseat to the stock's valuation, Devitt said in the note. Encouragingly, the company's management team prior lack of focus on privacy and security is now being addressed, although a at a slow pace.

Facebook's stock is trading at 18 times the firm's 2019E GAAP EPS (excluding net cash), which is attractive for a company that continues to grow north of 30 percent with a mid-40 percent GAAP operating margin, the analyst wrote.

Moreover, Facebook's stock is trading one turn higher on a GAAP EPS basis compared to Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and holding that turn relative to the firm's 20 times target multiple on Alphabet yields a valuation of around $200 for Facebook.

A $202 price target is justified using a discounted cash flow valuation model, which assumes a perpetual growth rate of 4 percent and a discount rate of 10 percent.

Price Action

Shares of Facebook were trading around $173.72 Friday morning.

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Latest Ratings for FB

DateFirmActionFromTo
Aug 2019AssumesBuy
Jul 2019MaintainsOutperform
Jul 2019MaintainsBuy

View More Analyst Ratings for FB
View the Latest Analyst Ratings

Posted-In: Scott Devitt social media StifelAnalyst Color Upgrades Price Target Top Stories Analyst Ratings Best of Benzinga

 

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