How Long Can Facebook Continue Blowing Past Estimates?

Social media giant Facebook Inc. (NASDAQ: FB) reported first-quarter results that included a 46% increase in ad revenues year over year. Monthly active users rose by 10% and daily active users rose by 8%, to 2.85 billion and 1.88 billion, respectively.

In a research note published late Wednesday, Canaccord Genuity analysts Maria Ripps and Michael Graham maintained their Buy rating on Facebook stock and raised their price target from $350 to $380 a share. The stock closed at $307.10 on Wednesday, implying potential upside of 23.7% to the analysts’ target. That’s a healthy gain for a company with a market cap of more than $900 billion.

Canaccord’s analysts write that the company continues to build out commerce functions across the platform in an effort to improve user experiences. Facebook “expects stable-to-accelerating revenue growth in Q2 before more difficult comps and targeting headwinds impact growth rates in 2H.”

The headwind, of course, is the recent change in Apple’s iOS 14.5 iPhone operating system requiring iPhone owners explicitly to allow non-Apple apps to track their movements around the world wide web. The company “continues to work on mitigating the impact” of that change, but the Canaccord analysts are sanguine:

While privacy changes create uncertainty, we think Facebook’s trove of 1P [first-party] data should help mitigate the impact, and the company’s continued integration of commerce functionality and a reasonable valuation create a favorable backdrop for owning the stock heading into the second half of the year.

That is essentially identical to what CEO Mark Zuckerberg told CNBC last month:

It’s possible that we may even be in a stronger position if Apple’s changes encourage more businesses to conduct more commerce on our platforms by making it harder for them to use their data in order to find the customers that would want to use their products outside of our platforms.

Even though Facebook did not provide guidance, Ripps and Graham raised their second-quarter and full fiscal year revenue and profitability estimates “to reflect tailwinds within the company’s largest advertising vertical, eCommerce, and improving monetization of the Stories and video ad formats, partly offset by ad targeting headwinds.”

The analysts also raised fiscal years 2022 and 2023 revenue estimates by 4.6% and 4.3%, respectively, from their prior estimates. Estimates of diluted earnings per share growth for 2021, 2022, and 2023 were raised by 11.3%, 5.2% and 5.1%, respectively.

In the early afternoon Thursday, Facebook stock traded up about 6.2%, at $326.05 in a 52-week range of $198.61 to $331.80. The high was set earlier Thursday morning. The consensus price target on the stock is $341.45, but that is likely to march higher over the next several days.

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