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Analysts still believe in Facebook

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10/31/2018 | 11:57am EDT

The company published results that were not as bad as analysts feared. Hence, they remain rather positive on the company’s future. But some areas are still cause for concern…

After a difficult second quarter, Facebook posted slightly better results in the third quarter: it narrowly missed expectations for global daily active users and revenues, but it beat on earnings per share. The social network giant recorded $1.76 per share on revenues of $13.73 billion. This topped consensus estimates of earnings of $1.47 per share, but missed the $13.8 billion in revenues foreseen by average analyst expectations.

Earlier this year, the company said revenue growth would decline in the third and fourth quarters, sending shares tumbling:

Source: Bloomberg
“Not as spooky as feared, but ghosts remain”, that is how analysts at Jefferies view Facebook’s results, which came out on Halloween. It said that while growth is decelerating, ‘19 seems to be a pivot point with investment stabilizing. “As we model out into '20 we see EPS growth accelerating into high teens and model $10+ in EPS in '21. It will probably take a few qtrs for sentiment to reverse, but with FB trading ~20x our '19 EPS (17x '20) we see more upside than down”.

Analysts at JP Morgan concur : "We are more positive on Facebook coming out of 3Q earnings and are once again adding it to the J.P. Morgan US Equity Analyst Focus List as a value pick. We recognize that concerns will remain around engagement and shifting social behavior, but we view the 2 billion+ user base as stickier than many believe, and Facebook is both adapting to and shaping user behavior. We continue to model revenue deceleration, but we believe it is manageable, particularly as Facebook continues to improve ad products and drive strong return on investment, and as marketers do not have good alternatives to Facebook's scale and returns."

Actually, most analysts are rather positive on the future of the company. Of the 49 analysts in the Thomson Reuters consensus, 41 issued a Buy or Outperform rating, while 6 went for a Hold.

Chief executive officer Mark Zuckerberg is betting the company’s future on “stories”, a format where videos and posts disappear after 24 hours. This is expected to become more important that even the news feed. However, Zuckerberg warned in a call with investors that this may make less money and steal user attention from the main stream of photos, comments and ads on the social network. “I want to be upfront that even assuming that we get to where we want to go...it will take some time and our revenue growth may be slower during that period,” he said.

Investors and analysts seem to be convinced by this vision, for now…

Romain Fournier
© MarketScreener.com 2018
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Financials ($)
Sales 2019 68 978 M
EBIT 2019 25 309 M
Net income 2019 22 195 M
Finance 2019 49 256 M
Yield 2019 -
P/E ratio 2019 21,87
P/E ratio 2020 18,67
EV / Sales 2019 6,09x
EV / Sales 2020 4,90x
Capitalization 469 B
Duration : Period :
Facebook Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends FACEBOOK
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 47
Average target price 195 $
Spread / Average Target 19%
EPS Revisions
Mark Elliot Zuckerberg Chairman & Chief Executive Officer
Sheryl Kara Sandberg Chief Operating Officer & Director
David M. Wehner Chief Financial Officer
Michael Todd Schroepfer Chief Technology Officer
Atish Banerjea Chief Information Officer
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