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Librarian Capital's Research Library
Facebook: Strong Q2 Results Unfairly Punished With 4% Dip (Preview)

Facebook: Strong Q2 Results Unfairly Punished With 4% Dip (Preview)

Company Update (FB US) (Buy)

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Librarian Capital
Jul 30, 2021
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Librarian Capital's Research Library
Librarian Capital's Research Library
Facebook: Strong Q2 Results Unfairly Punished With 4% Dip (Preview)
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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…

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