Facebook: Strong Q2 Results Unfairly Punished With 4% Dip (Preview)
Company Update (FB US) (Buy)
Summary
Facebook Q2 results showed ad revenues up 56% and EPS doubling, and yet shares fell 4%, providing investors a buying opportunity.
Ad revenue growth was driven primarily by a rise in average price per ad, reflecting market demand and the unique value of Facebook's ads.
The impact of iOS 14.5 has been within expectations; user numbers are growing and engagement is stable, even in the oldest U.S. market.
2021 outlook is largely unchanged from the last quarter, and new features and services are laying the foundation for longer-term growth.
With shares at $358.32, we expect an exit price of $560 and a total return of 56% (13.9% annualized) by 2024 year-end. Buy.
Introduction
We review our Facebook investment case, after Q2 2021 results released overnight on Wednesday (July 28). Facebook stock closed down 4.1% on the following day, but remained 33% up year-to-date.
We initiated our Buy rating on Facebook in May 2019. Since then shares have gained 109%, close to double the gain in the S&P 50…