Amid a global pandemic, some of the world’s largest advertisers said they would boycott Facebook Inc., which gets almost all of its money from online ads.
It would be reasonable to think that this would lead to difficult times for Facebook’s business and actions. But that was not what happened after the social media company’s second-quarter earnings report on Thursday afternoon, as Facebook shares jumped to record levels on Friday morning after analysts reported optimistic findings. Of the report.
“Apparently everything is great!” Wrote Bernstein analyst Mark Shmulik.
Shmulik tried to explain the seriousness of the situation and the inconsistent response on Facebook Facebook,
performance, with an analogy.
“Imagine that more than 1,000 customers pause their subscriptions, you cannot sell half of your product in a major market or on a certain device, knowing that users will spend less time in your store and the uncertainty of a global pandemic,” wrote the analyst. maintaining a top performance 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 for the third quarter. “
See: Facebook shares rally as quarterly results easily exceed Street View
Evercore ISI analysts described the results as “spectacular” and “impressive in light of the macro backdrop.”
“While the growth period in Q2 seems uneven, at its peak, Q2 growth rates were probably close to 20% yoy,” analysts wrote, maintaining a superior performance rating and a $ 300 price target. “Even taking into account the company’s typical cautious outlook, models on the street will move materially higher.”
According to FactSet tabulations, more than 20 analysts raised their Facebook stock price targets as a result of the gains, as the shares hit $ 250 and rose to record levels on Friday morning. That pushed the average price target about $ 30 higher early Friday, to $ 274.32 from $ 244.35.
Facebook’s revelation that ad revenue steadily increased by around 10% in July, the month advertisers had targeted a broad boycott, seemed to be the main reason analysts showed little concern about the #StopHateForProfit approach. by the big advertisers. Few believed that advertisers would stay away for long, as Facebook Chief Executive Mark Zuckerberg said.
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“We believe that [the boycott] it’s a short-term problem as Facebook has a strong track record of solving advertiser concerns for the past two years, “Mizuho analysts wrote as they maintained a buy rating and raised their target price from $ 270 to $ 285.
Morgan Stanley analysts were mildly concerned that the growth rate was lower than they expected, and while they also believe the boycott will not last long, they are concerned about an eventual effect on equities.
“Advertising revenue growth of 10% in July (and expected 10% in the quarter) is a notable step below our estimated growth of ~ 15% yoy in June. In our opinion, this is probably due to a short-term impact greater than expected by the boycott and a lower participation in Facebook, since participation is decreasing due to increasing levels of refuge, “the analysts wrote, while maintaining an overweight rating and increase your target price. up to $ 285 from $ 270. “While this is only a short-term problem (and we hope boycott advertisers will eventually return), this flatter recovery slope combined with IDFA uncertainty in Q4 may create tactical pressure on the actions”.
Meanwhile, Facebook has managed to keep growing due to a jump in ads for small e-commerce and video game companies, analysts said. In other words, all the ads users see for skins and mobile games are paying off for Facebook.
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RBC Capital Markets analyst Mark Mahaney credited “opportunistic game and e-commerce advertisers [taking] low price advantage, “and wrote that while” online advertising has been negatively impacted by COVID, … Facebook has proven to be the “toughest net advertiser.”
While many analysts raised their price targets and financial estimates for Facebook, there were no major changes to the ratings, likely because many analysts already consider buying a stock. Of the 47 analysts who cover Facebook that are tracked by FactSet, 39 consider the shares to be equivalent to a purchase, while six label it as a hold and only two rate the action as a sale.
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