In the midst of a global pandemic, some of the world’s largest advertisers have said they will boycott Facebook Inc., making almost all of their money from online advertising.
It would be reasonable to think that this will lead to difficult times for Facebook’s business and stocks. But that didn’t happen after the second-quarter earnings report on social media on Thursday afternoon, as Facebook shares instead jumped to record highs on Friday after analysts reported optimistic earnings from the report.
“Obviously everything is just great!” Wrote Bernstein analyst Mark Schmulik.
Schmulik tried to explain the gravity of the situation and the unconvincing response on Facebook Facebook,
performance, by analogy.
“Imagine 1000+ customers unsubscribing, you can’t sell half of your product in a major market or on a particular device, knowing that consumers will spend less time in your store and the uncertainty of a global pandemic,” the analyst wrote. while maintaining a rating of better results and a price tag of $ 285. “Yet Facebook sees 10% [year-over-year, quarter-to-date] growth and guidance to maintain this level for Q3. “
See: Facebook shares rallies, as quarterly results are easily displayed on the street
Evercore ISI analysts describe the results as “spectacular” and “stunning in the light of the macro background.”
“While the second-quarter growth tenor seems uneven, at its peak, the two-month growth rate is likely to approach 20% year-on-year,” analysts wrote, maintaining a superiority rating and a price price of $ 300. taking into account the typical cautious prospects of the company, the models across the street will move significantly more “
More than 20 analysts moved their price targets to Facebook funds higher as a result of the profit, according to FactSet tables, as shares rose 8.2% to a record closing level of $ 253.67 on Friday. The changes pushed analysts’ average price target by more than $ 30 higher on Friday, to $ 275.78 from $ 244.35.
Facebook’s revelations that advertising revenue continued to rise to about 10% in July, the month in which advertisers turned to a broad boycott, seem to be the biggest reason why analysts have little concern about the #StopHateForProfit approach from major advertisers. . Few believe that advertisers will stay away for long, according to Facebook CEO Mark Zuckerberg.
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“We believe in that [the boycott] is a short-term problem, as Facebook has a strong track record of addressing advertisers’ concerns over the past two years, “Mizuho analysts wrote, maintaining a buying rating and raising their price target to $ 285 from $ 270.
Morgan Stanley analysts were slightly concerned that the growth rate was lower than expected, and although they also believe that the boycott will not last long, they are concerned about the possible effect on shares.
“10% growth in advertising revenue in July (and expected 10% in the quarter) is a remarkable step compared to our projected growth of 15% on an annual basis in June. In our opinion, this is probably due to the greater-than-expected short-term impact of the boycott and lower engagement on Facebook, as engagement decreases with rising asylum levels, ”analysts wrote, maintaining an overweight rating and raising its price target to $ 285 to $ 270. “While this is only a short-term problem (and we expect boycott advertisers to eventually return), this flatter recovery slope, combined with IDFA’s uncertainty in 4Q, could create tactical pressure on stocks. . “
Meanwhile, Facebook managed to continue to grow due to a jump in advertising by small companies for e-commerce and video games, analysts note. In other words, all those users that users see for masks and mobile games pay off for Facebook.
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RBC Capital Markets analyst Mark Mahani attributes “opportunistic gaming and e-commerce advertisers [taking] advantage of depressed pricing, ”and writes that although Internet advertising has been negatively affected by COVID, … Facebook has proven to be the most resilient“ net advertiser ”.
While many analysts increased their price targets and financial ratings for Facebook, there were no major changes in ratings, probably because so many analysts already consider the stock a purchase. Of the 47 analysts covering Facebook tracked by FactSet, 39 considered the stock the equivalent of a purchase, while six marked it as retained and only two rated the stock as a sale.