Facebook, Inc FB shares were losing ground Thursday after the social media platformed reported a second-quarter earnings beat. Here's what the sell side had to say.
The Facebook Analysts
Credit Suisse’s Stephen Ju maintained an Outperform rating and increased the price target from $480 to $500.
Oppenheimer’s Jason Helfstein maintained an Outperform rating and increased the price target from $375 to $405.
Wells Fargo’s Brian Fitzgerald maintained an Outperform rating and increased the price target from $415 to $450.
Needham’s Laura Martin maintained a Hold rating.
Raymond James’ Aaron Kessler reiterated a Strong Buy rating and increased the price target from $415 to $450.
KeyBanc’s Justin Patterson maintained an Overweight rating and increased the price target from $414 to $420.
Related Link: How Facebook's Stock And Twitter's Stock Look Following Earnings
The Facebook Takeaways
Facebook’s ad revenue growth continued to impress, up 54% this quarter, said Credit Suisse analyst Ju. Video content and consumption is up, which should spearhead future growth, said Ju.
In the second quarter, video accounted for 50% of time spend, said Oppenheimer analyst Helfstein. Facebook is investing heavily in video, investing $1 billion in content creators, and offering editing tools for free through 2023, said the Oppenheimer analyst.
Facebook is also investing heavily into its strengths of VAR/AR, as evidenced through high Oculus-related R&D costs, according to the Oppenheimer and Wells Fargo notes.
Additional positives from the quarter include the “new normal” in e-commerce demand and Facebook’s marketplace services, said Wells Fargo's Fitzgerald.
Over the next two years, Facebook management is guiding a modest revenue deceleration due to app tracking transparency (ATT) headwinds relating to iOS 14.5’s new ad and data rules, said Fitzgerald.
In the quarter, ad revenue has been supported by less sustainable ad price increases (up 47% year-over-year) versus volume increases (up 6% year-over-year), said KeyBanc's Patterson.
Longer-term, Instagram Reels and Shops should provide ample levers for sustained volume-driven ad growth, said Patterson.
Despite growing daily active users, ad impressions are slowing, said Raymond James' Kessler.
Related Link: Why This Analyst Likes Google And Amazon Over Facebook At Current Levels
Facebook is additionally spending billions to buy a market with a smaller TAM than its current one, said Needham's Martin.
The company has an ad TAM of 2.8 billion daily active users, which is perfect for targeted advertising, said the Needham analyst.
The social media giant has a “walled garden” from which to pluck an almost uncountable number of ad impressions, she said.
Yet, the company is competing with FAANG peers in e-commerce through its marketplace, hardware and VAR/AR via Oculus, and content creation via its content investments for Reels, she said.
Though both the Raymond James Needham analysts voiced concerns over the company, they acknowledged the company's strong ad growth.
Facebook’s Q2 Earnings Recap
EPS came in at $3.61, beating consensus estimates of $3.02 by 20%.
Revenue came in at $29.08 billion, beating consensus estimates of $27.82 billion by 5%.
Third-quarter earnings are expected to be reported Oct. 28.
FB Price Action: Facebook was down 3.91% to $358.70 at last check Thursday.
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