Facebook: Q3 Reversal & Strategy Changes Indicate Potential Bottom
(Preview) Company Update (FB US) (Buy)
Summary
Facebook released Q3 2021 results overnight, and shares recovered slightly after having fallen 14.5% from their September peak.
Ad revenues reversed in Q3 to fall below Q2, due to the one-off impact of iOS 14 and macro issues, but other operational trends were solid.
Management outlook implies growth will resume in Q4, and major changes announced in product strategy will also help in the long term.
Lower expenses in the revised 2021 outlook mean EBIT is likely to grow 40% year-on-year. Last-twelve-month P/E is 23.3x.
With shares at $328.69, we expect an exit price of $619 and a total return of 88% (21.9% annualized) by 2024 year-end. Buy.
Introduction
We review Facebook’s Q3 2021 results released overnight (Monday, October 25). Facebook stock rose 1.8% in after-market trading.
We initiated our Buy rating on Facebook in May 2019. As of Monday close, shares have gained 92% since, including 20% year-to-date, though they have fallen 14.5% from its 52-week high in September.
During Q3, seq…