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Facebook Shares in Slump, Firm Still Sound
Stock Analysis & Ideas

Facebook Shares in Slump, Firm Still Sound

Concerns about a company are legitimate, but it remains necessary to look at its fundamentals when investing long-term. Heading toward its Q3 earnings release next week, investors have been shaken by events surrounding Facebook, Inc. (FB) causing its valuation to tumble over the last month while many other tech stocks have gained. However, some analysts believe these worries are overblown.  (See Top Smart Score Stocks on TipRanks)

One of those bullish voices is Brent Thill of Jefferies Group, who wrote that due to the slight slide in price, “FB’s valuation is among the most attractive in Internet.” He understands the concerns over retail supply chain disruptions, Apple’s (AAPL) shift in privacy settings hurting advertisers, and a high FY22 guidance as legitimate, although heartily disagrees that growth will decelerate.  

His confidence is shown by the Buy rating he assigned, as well as the $440 price target for the stock. This target represents a possible 12-month upside of 29.12% from current levels.  

Taking the side of the bulls in this heated debate, Thill asserts that all of these concerns are already baked into the discounted share price. He believes that any supply chain-induced slowdown in retail ad spending has already been taken into consideration by investors. Moreover, he sees the Wall Street consensus estimates on FB’s Q3 earnings as too conservative, allowing for an easy beat.  

Meanwhile, he added that the social media and technology company has been “aggressively” investing in virtual reality and metaverse innovations, with big plans to shift toward that area in the near future.  

From Thill’s research, he could not find evidence which showed less than robust ad spending. Additionally, Instagram Reels has now incorporated ads and is ramping up its revenue stream. The money brought in from Reels is not included in Thill’s current calculations, thus only represents a bonus if it turns out to be significant. Furthermore, the analyst enthusiastically mentioned that “Reels and Shops could potentially be multi-billion ad businesses in ‘22,” pointing to Facebook’s long-term growth prospects. 

According to TipRanks website traffic tool, visits to facebook.com have decreased -2.87% quarter-over-quarter, with the share price also falling –2.39% over that period. From the same quarter last year, visits to FB’s website are down 13.53%. Considering that facebook.com is a main component of its product, this metric is noteworthy.  

Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article. 

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance. 

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