By Jordan Faigen
Addicted to Snapchat? Well, your latest video messaging obsession might just switch you back to Facebook Inc (NASDAQ:FB) later this month, when they announce their newest “secret weapon.”
Facebook in the News
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Snapchat, the popular photo and video messaging application, might be in for some competition. The Financial Times has recently reported that Facebook is working on a similar messaging service called Slingshot. Facebook Inc (NASDAQ:FB) attempted to purchase Snapchat for $3 billion in November of last year, however, Snapchat did not accept the offer, leaving the messaging company vulnerable to competition. Facebook might be ready to release Slingshot by the end of this month, and then Snapchat will really see if it was a good idea to pass on the billions.
The social media giant is also expanding its advertising influence, allowing marketers to show video advertisements on Facebook in Britain, Brazil, and five other countries. Facebook Inc (NASDAQ:FB) just started selling these 15-second video ads in America in March and noted that the initial performance of the ads has been strong. The company is keeping a careful eye on these ads so as to not annoy users, but they are still moving forward with international expansion.
An Analyst Perspective
Cantor Fitzgerald analyst Youssef Squali reiterated his Buy Facebook Inc (NASDAQ:FB) recommendation on March 20, focusing on the success of one of Facebook’s latest billion dollar acquisition, WhatsApp. Squali noted, “WhatsApp surpassed 500 million users in April with a target of 1 billion plus users before starting to aggressively pursue monetization. Given the communication nature of WhatsApp and its high-value proposition, one could easily see how valuable this platform is.”
In this week’s Flashback Friday, we take a look at how Youssef Squali earned a +9.6% average return on Facebook Inc (NASDAQ:FB), helping him reach the number 13 ranked analyst out of 3082 analysts, with a +12.9% average return per stock and a 68% success rate of recommendations.
Back in September of 2012, Squali recommended BUY Facebook Inc (NASDAQ:FB) after the company’s first foray into e-commerce. Facebook announced that it was launching a service named Gifts that allowed users to send real gifts, such as coffee or chocolate, to other users. Squali noted, “Gifts alone may have a really small impact, but we expect many more innovations over time.” Squali was on the right track with this recommendation. The stock went from $21.66 at the time of this recommendation to $22.36 by the time he reached his next recommendation.
In October of last year, Squali recommended BUY Facebook Inc (NASDAQ:FB) after the company reported third-quarter earnings. At the time, Facebook remained one of Squali’s “favorite stocks” with a “relatively compelling valuation”. Squali noted, “Facebook reported very strong 3Q:13 results, with revenue and NEPS comfortably exceeding expectations. Most importantly, ad revenue growth accelerated to +66% Y/Y, with mobile now accounting for ~50% of ad sales.” The stock rose from $50.21 to $57.77 by the time of his next recommendation in December.
A few months later, in January of 2014, Squali maintained his BUY rating with a price target of $65.00, before Q4 numbers were released. Squali expected results to be in-line or better than his expectations, noting, “We expect FB to report solid results on 1/29 with revenue growth at ~53%, propelled mainly by mobile, and EBITDA margin at ~58%. We remain positive on FB, given increased ad load over the holidays, Facebook’s position as the largest/most engaged mass reach Internet platform for advertisers (88-100M U.S. users during prime-time hours every night), unmatched targeting potential, and now a potential mobile ad network in the works.”
Shortly thereafter, in March 2014, Facebook Inc (NASDAQ:FB) announced its acquisition of virtual reality company Oculus Rift and Squali reiterated his BUY rating and $67 price target. Squali admitted that this expensive purchase was “another potential longshot with an eye-popping valuation”, but he remained “impressed with management’s intense focus on trying to position Facebook for the next computing platform.” Squali also pointed out that, “P&L results from its other high-visibility deals, Instagram and Whatsapp, have yet to materialize, but it’s worth noting that growth in users and engagement for Instagram has so far exceeded our expectations, and management remains committed to growing Whatsapp to over 1B users.” This time the stock rose from $60.39 up to $60.87 at the time of his next recommendation.
Squali has recommended Facebook Inc (NASDAQ:FB) 13 times, and has earned a +9.6% average return on the stock based on his successful recommendations.
Jordan Faigen covers financial markets and the latest stock market news. She can be reached at [email protected]