Amid a global pandemic, some of the world’s biggest advertisers said they would boycott Facebook Inc., which makes almost all of its money from online ads.
It would be reasonable to think that this would mean difficult times for Facebook’s business and actions. But that didn’t happen after the social media company’s second-quarter earnings report on Thursday afternoon, as Facebook shares jumped record highs on Friday after analysts reported the optimistic withdrawal from the stock market. ‘report.
“Apparently, everything is fantastic!” Wrote Bernstein analyst Mark Shmulik.
Shmulik tried to explain the gravity of the situation and the incongruous response on Facebook̵7;s FB,
performance, with an analogy.
“Imagine more than 1,000 customers pausing their subscriptions, you won’t be able to sell half the product in a major market or on a particular device, knowing that users will spend less time in your store and the uncertainty of a global pandemic,” wrote the analyst. maintaining a higher rating and a $ 285 price target. “And yet, Facebook is seeing 10% [year-over-year, quarter-to-date] growth and guidance to maintain this level during the third quarter ”.
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ISI Evercore analysts described the results as “spectacular” and “impressive in light of the macro context.”
“While the tenor of Q2 growth appears to be uneven, at its peak, Q2 growth rates were likely to approach 20% annually,” analysts wrote, while maintaining a higher rating and a target of priced at $ 300. “Even taking into account the company’s previous prospects, the models on the street will go significantly higher”
More than 20 analysts raised their price targets on Facebook shares as a result of results, according to FactSet tabs, as shares rose 8.2% to a high of $ 253.67 on Friday. The changes pushed analysts ’average price of more than $ 30 on Friday to $ 275.78 from $ 244.35.
Facebook’s revelation that advertising revenue was steadily growing at around 10% in July, the month advertisers had opted for a broad boycott, seemed to be the biggest reason analysts showed little concern for #StopHateForProfit’s approach. great advertisers. Few believed the advertisers would be out of time, Facebook CEO Mark Zuckerberg said.
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“We believe that [the boycott] It’s a short-term issue, as Facebook has a strong track record of resolving advertisers’ concerns over the past two years, “wrote Mizuho analysts, maintaining a buy rating and raising its price target to 285 dollars from $ 270.
Morgan Stanley analysts were slightly concerned that the growth rate was slower than expected and, while they also believe the boycott will not last long, they are worried about a possible effect on the shares.
“Advertising revenue growth of 10% in July (and is forecast at 10% in the quarter) is a significant decline from our estimated growth of 15% to 15% in June. In our minds, this is probably due to a greater long-term impact than expected due to a boycott and lower participation in Facebook, as the commitment decreases in reception levels ”, wrote the analysts, maintaining an overweight rating and increasing its price target. at $ 285 from $ 270. ”While this is only a short-term issue (and we expect advertisers to boycott it again), this slower recovery slope combined with the IDFA uncertainty of 4Q can put tactical pressure on actions. “
Meanwhile, Facebook has managed to continue to grow due to a jump in ads from small e-commerce and video game companies, analysts said. That is, all the ads that users see for masks and mobile games are paying their price for Facebook.
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Mark Rhan analyst Mark Capital, credited as “opportunistic gambling and e – commerce advertisers [taking] advantage of depressed prices “, and wrote that, although online advertising has been negatively affected by COVID, … Facebook has proven to be the most resilient” net advertiser “.
While many analysts raised their price targets and financial estimates for Facebook, there were no major changes in valuations, probably because so many analysts already consider the stock market to be a buy. Of 47 Facebook analysts tracking FactSet, 39 consider the stock to be the equivalent of a purchase, while six label it as a hold and only two value the stock as a sale.