Facebook (FB, Financial) is a stock that has divided opinion among analysts ever since it went public. However, the stock's performance seems to have changed opinion in its favor. In this article, we will take a look at what different analysts think of Facebook and how it is positioned for the long run. Moreover, we will also take a closer look at its key metrics to determine whether or not it is a worthy investment.
A closer look at the sentiments
According to Brian Wieser, an analyst at Pivotal Research, Facebook possesses more valuable user data than any company except Google. However, privacy concerns over a recently reported science experiment that Facebook performed on users and their newsfeeds is not an issue to investors, advertisers or the general population.
According to eMarketer, Facebook is estimated to capture approximately 8% of the digital ads market worldwide by the end of the year, second only to Google.
Michael Graham of Canaccord Genuity believes that the company is still very early in monetizing its user base and has raised his price target on Facebook from 75 to 84.
According to Anthony DiClemente, an analyst at Nomura User and engagement growth was high, and mobile ad revenue also exceeded the estimates and raised his price target on Facebook from 78 to 82.
Analyst John Blackledge at Cowen & Co. writes that the tone from management in the post-earnings conference call was confident and suggests strong customer interest with many of the new products steadily maturing and approaching monetization leading to an increase in price target to 90 from 85.
JP Morgan has raised its price target to $90 from $80 which had earlier kept an Overweight rating on the stock.
Victor Anthony of Topeka Capital Markets reiterates a Buy rating for the stock and raises his price target to $100 from $80, mentioning the stock to be still in the top pick quoting that the management has delivered results exceeding the expectations on all metrics for the past two years which no other company in has this track record. Hence, the shares are believed to trade at a premium multiple to the peer group.
A look at the key metrics
The trailing P/E and forward P/E ratios of 97.25 and 37.12 represent robust cost cutting efforts by the company, coupled with a healthy ramp in the operations. The PEG ratio of 1.26, above 1, indicates slower growth and is comparable to the industry’s average of 1.22. The profit margin is good at 23.78%. However, the revenue per share and diluted EPS of 4.01 and 0.77 suggest a decline in earnings.
The quarterly revenue growth and quarterly earnings growth of 60.50% and 137.50%, respectively, are very impressive and signify healthy growth. The current ratio of 12.82 signifies the stability of the company’s balance sheet. Finally, the investors are strongly advised to invest into this growth story looking at the impressive long-term growth prospects of the company as indicated by the CAGR for the next 5 years per annum of 37.15%, much above the industry’s average of 20.64% and expect promising returns in a long run.
