Facebook Inc (NASDAQ:FB) appears to have carried its second quarter earnings momentum into the current quarter, which will be wrapping up in a few days. After doing some checks on the social network’s progress, UBS analysts have increased their price target for the company from $45 to $60 per share and reiterated their Buy rating on its stock.
Facebook advertiser checks look good
Analyst Eric J. Sheridan and associates Vishal J. Patel and Timothy E. Chiodo issued a research note to investors this week with the results of their latest industry checks. They said so far third quarter click-through rates and user engagement appear to be exceeding the internal goals set by Facebook Inc (NASDAQ:FB)’s advertisers.
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They said many of the advertisers they spoke with compared the social network’s opportunity to the early days of search. For example, some say there’s a “long-tailed opportunity” for new buyers to start spending their advertising dollars on the company’s platform. Data from the retargeting platform Triggit suggests only 9 percent of the Internet Retailer Top 500 is using Facebook Exchange, so there’s plenty of room for growth.
In fact, the UBS analysts said if advertiser budgets keep building at Facebook Inc (NASDAQ:FB) through next year, their newly increased revenue estimates may even end up being conservative.
Third party stats on Facebook look good too
They said there are a number of third party companies providing statistics about Facebook which appear to support claims made by advertisers. Several advertisers told them that they see a better return on investment through the social network, particularly because of strong engagement. They point to data from Triggit which showed that cost per impression on Facebook Exchange is 60 percent lower than real-time bidding but yields 92 percent higher response rates.
Triggit’s data also showed that Facebook Exchange ads have demonstrated a 27 times increase in click-through rate over the last year. Data from Yieldbot also showed that click-through rates for Facebook Inc (NASDAQ:FB) improved 60 percent for desktop and almost quadrupled for mobile engagement between May and July.
According to the analysts at UBS, all of these areas of high return on investment continue to attract dollars from their advertising budgets.
Facebook estimates increased
They modestly raised their operating estimates for Facebook Inc (NASDAQ:FB), raising their estimated 2014 revenues to $10.4 billion and earnings before interest, taxes, depreciation and amortization to $5.8 billion. They increased those estimates because of the strength they see in Facebook Exchange retargeting and mobile advertising.
They are looking for mobile ad revenues of $810 million for the third quarter of the year and $10.4 billion in the fourth quarter. But they note that now they believe some of Facebook’s new monetization initiatives will slip into next year, like video advertising, which they expect to see in the first quarter of next year, and Instagram monetization, which they are looking for in the second half of next year.