Baird Equity Research Analyst Colin Sebastian checks in with top tech companies as Q1 wraps up, noting some key positives for Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOG). The report is located below:
“Positive field checks to finish Q1. After completing end-of-quarter field checks, we believe there is good visibility for our 1H financial targets for Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR), which may also prove conservative. Along with Google Inc (NASDAQ:GOOG), large-scale social platforms are disproportionately benefiting from the rapid shift to mobile, with these three platforms controlling nearly 70% of mobile spending vs. 10% of overall advertising. Maintain Outperform ratings on Google Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB), Neutral rating on Twitter.
Brook Asset Management was up 7.27% for the first quarter, compared to the MSCI GBT TR Net World Index, which returned 3.96%. For March, the fund was up 1.1%. Q1 2021 hedge fund letters, conferences and more In his March letter to investors, which was reviewed by ValueWalk, James Hanbury of Brook said returns during Read More
Healthy Facebook trends continue, with additional levers to pull
Our checks for Facebook Inc (NASDAQ:FB) suggest that Mobile newsfeed ads and App Install Ads in particular continue to ramp quickly, contributing to strong Y/Y growth, despite normal Q/Q (seasonal) variances. Moreover, Facebook Inc (NASDAQ:FB)’s tweaks to the news feed algorithm appear to favor paid postings at the expense of “organic” postings, likely driving higher levels of spending on the site. As such, our checks reinforce a positive bias on the stock, with upside potential to our Q1 revenue and EPS estimates of $2.35 billion and $0.23, respectively. More broadly, Facebook Inc (NASDAQ:FB) continues to deliver improving monetization on a growing user base, and looking ahead, we see further levers to drive growth from premium video ads, Instagram, extending FBX (Facebook Exchange) to mobile, and the launch of a third-party ad network.
Twitter usage may get boost from Q1 “events.”
Our checks also suggest that Twitter Inc (NYSE:TWTR) continues to ramp in share of ad spending, albeit with a focus on integration with “mass media” channels such as cinema and television. While secular tailwinds, Mobile shift and quick pace of product innovation should provide plenty of runway for growth, near-term stock sentiment will be driven by the potential stabilization in the Q/Q user growth rate due to the number of annual (e.g., Super Bowl) and one-time (e.g., Sochi Olympics) events drawing more users (see Exhibit 2). Overall, we are more constructive on pullbacks as Twitter Inc (NYSE:TWTR) remains, in our view, a very compelling broadcast medium for both advertisers and users.
Initial search data points also appear positive
While we are still finalizing Q1 paid search checks, preliminary data from search engine marketing providers such as Ignition One suggest healthy growth skewed towards Mobile formats (and Google’s Enhanced Campaigns). Search engine market share also appears stable, although we note Microsoft Corporation (NASDAQ:MSFT) recently announced several enhancements to Bing, including Product Ads.”