Facebook Inc (NASDAQ:FB) shares are rising too fast even for analysts. The shares of the social networking site have gained 28% so far this year, which is far ahead of the 1% return for the Standard & Poor’s 500 stock index. The phenomenal run has left 49 analysts who cover Facebook in a state of chaos. Of the total, 38 analysts have a Buy rating on Facebook, and 16 have a target price below the company’s current trading price, according to data compiled by Bloomberg.
Trading above analyst’s estimate not new for Facebook
Overall, average 12-month price target for Facebook Inc (NASDAQ:FB) is $72.92, which is just around 1% more than the company’s March 11 closing price of $70.10. Owing to the impressive run, price targets of many of the analysts, which were given at the start of the year, appear out-of-date now.
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
Richard Greenfield, an analyst at BTIG in New York, said “Facebook stock has just ripped past expectations,” and added “We’re very happy with our rating upgrade to buy, but it has all happened superfast.” In October, when Facebook Inc (NASDAQ:FB) was trading at a mere $49, the analyst gave a Buy rating on the stock with a price target of $68, over the next 12 months.
Trading above analysts’ price targets is not something new for Facebook Inc (NASDAQ:FB). Last year (including almost full September), the social networker on many occasions traded beyond the estimated target.
Need reason to raise price target
Facebook Inc (NASDAQ:FB), which currently has a market cap of $180 billion, is trading 122 times the past four quarters’ earnings. As per the data from Bloomberg, with such high valuation, Facebook is more expensive than 98% of the companies trading in the S&P 500.
Analysts are very optimistic on the stock, giving a 4.6 out of 5 recommendation consensus, which lands Facebook Inc (NASDAQ:FB) in the top 5% of the S&P 500, according to the data from Bloomberg. Only nine analysts recommend a Hold on Facebook while none dared to give it a Sell.
Some of the analysts do not consider the price rise alone to adjust a higher price target. Colin Sebastian, an analyst at Robert W. Baird said that they carry “field checks and surveys” during a quarter to verify the position of the company. “You need to have a reason to adjust valuations beyond just because the stock has moved,” he says.