Facebook: Strong Rebound In Q1, Multi-Year Compounding Ahead (Preview)

Company Update (FB US) (Buy)

Summary

• Facebook shares are up 8% in pre-market trading after Q1 2021 results overnight, and we believe it remains attractive to investors.

• Ad revenues rebounded by 45.9% year-on-year in Q1, following a 17.0% growth in the prior year, with average price per ad up 30%.

• Operational metrics remain strong, management believe iOS 14.5's impact will be manageable, and other R&D are progressing.

• Based on management outlook and our own estimates, we believe Facebook's EBIT growth will exceed 20% in 2021.

• With shares at $332, we expect a 2024 exit price of $515, implying a total return of 55% (12.7% annualized), in just under 4 years. Buy.

Why is Facebook Stock Up?

Facebook shares are trading 8% higher in pre-market trading on Thursday (April 29), after the company reported Q1 2021 results overnight.

We originally initiated our Buy rating on Facebook stock in March 2019, and have reiterated it several times since. At around $332 in pre-market trading, Facebook shares have so far risen nearly 95% in ju…