Facebook Inc (NASDAQ:FB) stock spiked in early trading on Monday following a report from Morgan Stanley which initiated coverage assigning an Overweight rating and a price target of $90 on the stock. Morgan Stanley’s Benjamin Swinburne also tells investors not to worry about the rising expenses.
Facebook mobile ads growth impressive
The Morgan Stanley analyst is positive on the Facebook Inc (NASDAQ:FB) ad revenue strategy, and are viewing its target ads as being effective going by the level of engagement for its 1.23 billion users. Additionally, the report noted that the social networking site’s mobile ad penetration will grow twofold to 70% by 2020 from 35% now, with a yearly growth of 30% per year for mobile Internet time spent on the social media site.
Since the financial crisis, Warren Buffett's Berkshire Hathaway has had significant exposure to financial stocks in its portfolio. Q1 2021 hedge fund letters, conferences and more At the end of March this year, Bank of America accounted for nearly 15% of the conglomerate's vast equity portfolio. Until very recently, Wells Fargo was also a prominent Read More
Noting the social networkers scale, Swinburne notes that the company’s monthly user base is already the size of the total population of China, and its 1.4 billion MAUs represent almost the half of global internet users and over 55% of the smartphone users around the globe.
Separately, analysts at The Street have assigned a Hold rating to the stock, citing the primary factors of rating to be mixed — some “indicating strength, some showing weakness, with little evidence to justify the expectation” of either a positive or negative performance relative to most other stocks. Analysts noted that the company is exhibiting strength in various areas such as solid revenue growth, sound financial position with reasonable debt level and strong earnings per share growth.
Weak guidance for 4Q
Facebook Inc (NASDAQ:FB) has, however, provided less than sanguine guidance for the fourth-quarter, noting that spending would surge 50% to 70% next year with the company adding more employees and investing in newer products. However, CEO Mark Zuckerberg was not overly concerned about the revenue and expenses, and instead talked about the opportunities for the social network that will only start adding to revenues after several years.
“For the next 10 years, our focus is on driving the fundamental changes in the world that we need to achieve our mission, connecting the whole world,” Zuckerberg said on the call. Paul Sweeney, an analyst at Bloomberg Intelligence said that as the revenue growth of the company declines and expenses rise; investors will be compelled to adjust their near-term outlook.
On Monday, Facebook Inc (NASDAQ:FB) shares were down 1.48%.