Reuters Facebook: Cash machines can pay the price
I bullish on Facebook (NASDAQ 🙂 because of its competitive position, strong growth momentum and reasonable share price have made it attractive.
Facebook is the world’s largest social media platform, founded in 2004 by Mark Zuckerberg. The company’s mission is to build an online community of people and grow their business, bringing the world closer. (See FB stock chart at TipRanks)
Facebook Stock is one of the best performers among the five big tech companies, including Google (NASDAQ :), Amazon (NASDAQ :), and Apple (NASDAQ :). The company’s stock rose 27.5% in 2021, surpassing its market capitalization of 1 1 trillion in the first quarter of 2021.
With more than 10 million active advertisers, Facebook remains the king of the online advertising space. The company has seen significant growth during the epidemic, with many businesses even shutting down their marketing.
Facebook’s second-quarter earnings in 2021 beat analysts’ expectations as earnings more than doubled each year.
The company’s revenue also exceeded expectations, and rose 56% year-over-year to .1 29.1 billion. This was the fastest pace of revenue for the company since 201 revenue.
Facebook’s monthly active users were 2.9 billion at the end of the second quarter of 2021, showing a 7% year-over-year increase. The balance sheet was strong as of June 30, with cash, cash equivalents and marketable securities of .1 64.1 billion.
Facebook also announced an increase in advertising revenue in the second quarter of 2021, an increase of%% on average ad prices and a %% increase in the number of ads distributed year after year.
The company added that it expects revenue growth in advertising over the next two quarters to be driven primarily by an increase in advertising prices over a year.
In the coming quarters, Facebook expects a slowdown in revenue growth, which is responsible for Apple’s recent update that allows users to remove themselves from tracking features in apps on iOS devices, which Facebook believes will reduce developers’ ability to monetize ads.
Facebook’s earnings momentum could continue in the third and fourth quarters due to revenue and user growth on its platforms, including WhatsApp and Instagram.
At the moment Facebook stock looks quite reasonable. It costs just 23.7x for normal earnings and 24.4x for free cash flow forwarding, both of which are significant discounts in the broader stock market.
Revenue is expected to grow 19.2% in 2022, and 13.3% in fiscal 2022 after growing 39.9% in 2021.
Tech on Wall Street
From Wall Street analysts, Facebook has gained a strong buy analyst sens rating over the past three months based on 25 buy ratings, four hold ratings and one cell rating. In addition, the average FB price target of 1 421.97 has the opposite potential at 23.4%.
Facebook is still experiencing very strong growth despite its huge size, and enjoys a stellar balance sheet and world-class trenches.
The company is a free cash flow generating machine, providing significant options on how it works to create shareholder value.
Meanwhile, the share price has remained quite reasonable compared to the broader market, and Wall Street as a whole is also quite bright in the stock.
Disclosure: At the time of disclosure, Samuel Smith was not in any of the securities mentioned in this article.
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