Social Media Giant Facebook on Track to Beat Earnings Estimates Again

The world’s largest online social network Facebook is expected to report its third-quarter earnings of $3.18 per share, which represents year-over-year growth of over 17% from $2.71 per share seen in the same period a year ago.

The Menlo Park, California-based social media conglomerate would post revenue growth of over 35% to around $29.3 billion. It has beaten consensus earnings per share estimates in all of the last four quarters.

According to ZACKS Research, Facebook forecasts the revenue growth rate for the third and fourth quarters of 2021 is expected to decelerate significantly on a sequential basis. Changes implemented in iOS 14.5 will limit the company’s ability to track user activity trends. The social media company estimates its current year expenses will range between $70 billion and $73 billion.

Facebook is forecasting capital expenditures of $19 billion to $21 billion for the current year, driven by increased investments in data centers, servers, infrastructure and office spaces. Facebook shares rose over 6% to hit an all-time high of $421.1499 on Wednesday, ZACKS Research added.

Facebook’s better-than-expected third-quarter earnings results, which will be announced on Monday, October 25 after the close of trading, could help the stock recoup recent losses. The company’s shares rose over 25% so far this year. It was trading 0.26% higher at $341.78 on Thursday.

Analyst Comments

“We kept our 3Q21 adv forecast in check after our 3Q21 Digital ad expert call on 10/8, which suggested strong but decelerating ad growth at Core FB and IG with growth led mainly by pricing. For 3Q21, we are +0.7% & (1.0%) vs. consensus revenue & EBITDA; we are 1.1% and 1.6% above 4Q21 cons. rev. & EBITDA. Investors will focus on iOS 14.5 colour and 4Q21 rev. guide at the print,” noted John Blackledge, equity analyst at Cowen.

“We forecast 16% annual revenue growth’21-’26 driven by 16% annual advertising revenue and offset by 6% annual Other revenue. We view Advertising revenue as driven mostly by the contribution of mobile, video and Instagram, while we forecast Desktop remaining flattish. We expect EBITDA margins to remain roughly in line with current levels.”

Facebook Stock Price Forecast

Thirty-three analysts who offered stock ratings for Facebook in the last three months forecast the average price in 12 months of $422.88 with a high forecast of $500.00 and a low forecast of $300.00.

The average price target represents a 23.77% change from the last price of $341.66. From those 33 analysts, 27 rated “Buy”, five rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $400 with a high of $485 under a bull scenario and $300 under the worst-case scenario. The firm gave an “Overweight” rating on the social media company’s stock.

“Monetization Potential: We are positive on Facebook’s (FB) monetization roll-out of Instagram as well as FB’s ability to continue to innovate and improve its monetization (Canvas Ads, Dynamic Ads, video). Combined with high and growing engagement we see monetization upside going forward,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Investing from Position of Strength to Drive Faster Long-Term Growth: We are modeling ~32% GAAP opex (excl. one-time items) growth in 2021, implying an incremental ~$16bn in opex. Our base case model implies opex per employee moderates in ’21 while FB hiring remains roughly flat on an absolute basis. We believe FB will grow EPS at a ~40% CAGR (2019-2022).”

Several other analysts have also updated their stock outlook. Jefferies raised the price objective to $440 from $425. HSBC lifted the target price to $300 from $275. Citigroup upped the price target to $365 from $320.

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