Facebook (FB, $373.28) blew past Wall Street's bottom- and top-line estimates when it posted results late Wednesday, yet FB stock slumped Thursday on concerns about decelerating second-half growth as it laps tougher year-over-year comparisons.
But that doesn't affect the long-term investment thesis on the name, insists Raymond James analyst Aaron Kessler, who reiterated his Strong Buy recommendation on Facebook stock and hiked his price target to $450 from $415.
"Facebook reported strong second-quarter revenue, with 51% foreign-exchange neutral ad revenue growth driven by broad-based strength across advertiser types and verticals (e-commerce, retail, and consumer packaged goods, as well as recovery in COVID-affected verticals like travel and media)," Kessler writes in a note to clients.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The social media giant's second-quarter earnings per share (EPS) of $3.61 topped the Street's forecast of $3.03 a share by a wide margin. Revenue likewise surprised to the upside, at $29.08 billion vs. expectations for $27.89 billion.
The market's immediate problem with FB stock stemmed from the company’s short-term outlook.
CFO David Wehner said Facebook projects year-over-year revenue growth to slow “significantly” through the end of 2021 as it comes up against difficult comps. Digital ad spending rebounded sharply in the second half of last year from a COVID-caused slowdown, in turn juicing FB's top-line performance.
Wehner added that if the Street takes 2019 as its baseline, growth would slow "modestly" in the second half.
Raymond James' Kessler says "modestly decelerating growth on a two-year basis" doesn't change the fact that the macroeconomic backdrop remains strong.
"We believe that the strength in the broader digital advertising industry is likely to persist, driven by continued digital transformation and that Facebook is a key beneficiary," the analyst adds. "We continue to expect solid long-term revenue growth; monetization of newer platforms is increasing; and we believe valuation is attractive."
Kessler views are very much in the majority on the Street. Of the 49 analysts issuing opinions on FB stock tracked by S&P Global Market Intelligence, 34 rate it at Strong Buy, seven say Buy, six call it a Hold, one has it at Sell and one says Strong Sell. Their consensus recommendation stands at Buy, with high conviction.
Analysts collectively forecast FB to generate average annual EPS growth of almost 22% over the next three to five years. That's a notably rapid growth rate for a company of this size. Recall that Facebook's market capitalization now tops $1 trillion.
Lastly, the Street's average target price of $406.39 gives FB stock implied upside of roughly 9% over the next 12 months or so.
-
Your 401(k) is Changing: Trump Moves to Open the Door to Private Assets, CryptocurrencySix months into President Trump’s second term, and 401(k) savers are getting ready to have more ways to diversify their retirement savings accounts.
-
I Let AI Read Privacy Policies for Me. What I Learned Was Frustrating.A reporter uses AI to review privacy policies, in an effort to better protect herself from fraud and scams.
-
If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have TodayBerkshire Hathaway is a long-time market beater, but the easy money in BRK.B has already been made.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have TodayProcter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
-
Stock Market Today: Solid Signals Lift Stocks Despite Tariff NoiseMarkets are whistling over the White House in an ongoing display of corporate America's enduring ability to survive and advance.
-
Stock Market Today: Trump's Copper Comments Cause a StirMarkets remain resilient and monetary policy makers stand fast against a rising tide of new terms of trade, including around copper.
-
Stock Market Today: President Trump Reboots the Tariff TradeA broad consensus that markets hate uncertainty more than anything else is being tested on an almost daily basis in 2025.
-
Stock Market Today: Another Quarter, More Mixed Price Action"Up and to the right" remains the general trend despite persistent uncertainty around critical policy issues.
-
Are These the Next Stocks to Split?Interactive Brokers' recently split its stock to makes its shares more accessible to investors. Could these high-priced stocks be next?
-
Stock Market Today: S&P 500, Nasdaq Near New HighsThe S&P 500 hasn't hit a new high since February. It's been since December for the Nasdaq.
