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Facebook: A Libra-rating Quarter, Cheers RBC Capital

July 25, 2019
All hail the social media king. Facebook (FB) has just reported extremely impressive Q2 results. FB’s Q2 Revenue & Operating Income came in well above Street estimates, with Ad Revenue growth accelerating. This marks the first acceleration quarter since Q4 2015!Key drivers were acceleration in Ads Delivered to 33%, growth in advertisers, growth in ad inventory (thanks in part to Stories), stable pricing & a series of optimizations (e.g. faster ad refreshments speeds, dynamic ads, video ads). “Small optimizations on massive platforms move needles” cheered five-star RBC Capital analyst Mark Mahaney. Following the print, the analyst hiked his price target from $250 to $260- making him one of the Street’s most bullish analysts. From current levels the new price target indicates upside potential of 27%. That isn’t all. Mahaney also repeated his take on Facebook as the best internet stock out there right now. “Reiterate Outperform On Our Top ‘Net Long: We are more positive -- FB could be in a sustained re-rating period, as the worst FB Fears appear not to have been realized” enthused the analyst.Clearly this upbeat sentiment is reflected by the Street. Based on 30 polled analysts, FB retains its Strong Buy analyst consensus rating. In the last three months, 26 analysts have published buy ratings on the stocks. That’s versus just 4 hold ratings. Meanwhile the $223 average analyst price target indicates 9% upside potential from current levels. Specifically, revenue grew 32% Y/Y ex-FX to $16.9 billion vs. Street at 16.5 billion, while Ad Revenue growth ex-FX accelerated from 31% in Q1 to 32%. Meanwhile monthly active users (MAUs) soared 8% Y/Y to 2.41 billion, with daily active users (DAUs) also up 8% Y/Y to 1.59 billion – both in-line with estimates and maintaining Q1 growth rates. Operating Income of $6.63 billion was well above Street, while FB reiterated conservative guidance re: Rev Growth deceleration & its FY19 opex growth guide. “During a period when FB was arguably Public Enemy 1, it faced GDPR [General Data Protection Regulation], and it went thru a “monetization challenge” with Stories, its Y/Y ad revenue growth deceled from 38% to 32%. Sticky! And in North America – its largest & most mature market – its growth rate barely changed over the last 4 quarters (33%, 31%, 30%, 30%). Really sticky!” wrote Mahaney. He highlights FB’s intrinsically attractive valuation (20X ’20E GAAP P/E), very strong fundamentals ($20B in ’19E FCF), and an attractive value proposition to both consumers (2.7B and counting…) as well as advertisers (thanks to its Google-like return on investment (ROI)). As a result his bullish investing thesis remains firmly intact. Indeed, Mahaney’s extensive marketer survey continues to show FB – along with GOOGL – as the internet’s ROI leader. What’s more, Facebook has more than 2.7B active users and is still growing users double-digits Y/Y. The large amount of data collected on these users is a unique and valuable asset for ad and content targeting, says the analyst. See FB's price targets and analyst ratings on TipRanks Read...

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="All hail the social media king. Facebook (FB) has just reported extremely impressive Q2 results. FB’s Q2 Revenue &amp; Operating Income came in well above Street estimates, with Ad Revenue growth accelerating. This marks the first acceleration quarter since Q4 2015!” data-reactid=”11″>All hail the social media king. Facebook (FB) has just reported extremely impressive Q2 results. FB’s Q2 Revenue & Operating Income came in well above Street estimates, with Ad Revenue growth accelerating. This marks the first acceleration quarter since Q4 2015!

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Key drivers were acceleration in Ads Delivered to 33%, growth in advertisers, growth in ad inventory (thanks in part to Stories), stable pricing &amp; a series of optimizations (e.g. faster ad refreshments speeds, dynamic ads, video ads). “Small optimizations on massive platforms move needles” cheered five-star RBC Capital analyst Mark Mahaney.” data-reactid=”12″>Key drivers were acceleration in Ads Delivered to 33%, growth in advertisers, growth in ad inventory (thanks in part to Stories), stable pricing & a series of optimizations (e.g. faster ad refreshments speeds, dynamic ads, video ads). “Small optimizations on massive platforms move needles” cheered five-star RBC Capital analyst Mark Mahaney.

Following the print, the analyst hiked his price target from $250 to $260- making him one of the Street’s most bullish analysts. From current levels the new price target indicates upside potential of 27%.

That isn’t all. Mahaney also repeated his take on Facebook as the best internet stock out there right now. “Reiterate Outperform On Our Top ‘Net Long: We are more positive — FB could be in a sustained re-rating period, as the worst FB Fears appear not to have been realized” enthused the analyst.

Clearly this upbeat sentiment is reflected by the Street. Based on 30 polled analysts, FB retains its Strong Buy analyst consensus rating. In the last three months, 26 analysts have published buy ratings on the stocks. That’s versus just 4 hold ratings. Meanwhile the $223 average analyst price target indicates 9% upside potential from current levels.

Specifically, revenue grew 32% Y/Y ex-FX to $16.9 billion vs. Street at 16.5 billion, while Ad Revenue growth ex-FX accelerated from 31% in Q1 to 32%. Meanwhile monthly active users (MAUs) soared 8% Y/Y to 2.41 billion, with daily active users (DAUs) also up 8% Y/Y to 1.59 billion – both in-line with estimates and maintaining Q1 growth rates.

Operating Income of $6.63 billion was well above Street, while FB reiterated conservative guidance re: Rev Growth deceleration & its FY19 opex growth guide.

“During a period when FB was arguably Public Enemy #1, it faced GDPR [General Data Protection Regulation], and it went thru a “monetization challenge” with Stories, its Y/Y ad revenue growth deceled from 38% to 32%. Sticky! And in North America – its largest & most mature market – its growth rate barely changed over the last 4 quarters (33%, 31%, 30%, 30%). Really sticky!” wrote Mahaney.

He highlights FB’s intrinsically attractive valuation (20X ’20E GAAP P/E), very strong fundamentals ($20B in ’19E FCF), and an attractive value proposition to both consumers (2.7B and counting…) as well as advertisers (thanks to its Google-like return on investment (ROI)). As a result his bullish investing thesis remains firmly intact.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Indeed, Mahaney’s extensive marketer survey continues to show FB – along with GOOGL – as the internet’s ROI leader. What’s more, Facebook has more than 2.7B active users and is still growing users double-digits Y/Y. The large amount of data collected on these users is a unique and valuable asset for ad and content targeting, says the analyst. See FB’s price targets and analyst ratings on TipRanks” data-reactid=”40″>Indeed, Mahaney’s extensive marketer survey continues to show FB – along with GOOGL – as the internet’s ROI leader. What’s more, Facebook has more than 2.7B active users and is still growing users double-digits Y/Y. The large amount of data collected on these users is a unique and valuable asset for ad and content targeting, says the analyst. See FB’s price targets and analyst ratings on TipRanks

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