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Facebook Under Duress, Will It Affect Q3 Earnings? Analyst Weighs In

Next week (Monday, Oct 25), Facebook (FB) will report 3Q21’s financials and it’s safe to say the earnings call won’t be boring. The company has a plethora of issues to plough through; from the recent whistleblower allegations to its failing algorithms and the impact of Apple’s ATT (app tracking transparency) initiative, to the much talked about metaverse to the apparent rebranding the company is about to undertake.

With the last one, Facebook might be hoping to push the reset button with a new moniker. The stock is being held “hostage” to the deluge of negative news flow, says Monness’ Brian White.

Whether a name change will alter the perception of Facebook remains to be seen. However, Facebook – or Zuckerverse? as the Guardian has suggested – has shown itself to be uniquely adept at swatting away controversies. And what hasn’t changed in the face of much scrutiny is its ongoing success.

Looking ahead to the print, White expects Facebook will meet his revenue estimate of $30 billion -indicating a year-over-year increase of 40% – and EPS forecast of $3.38. Street has $29.59 billion and $3.17, respectively.

The sales estimate amounts to a sequential uptick of 3%, which is actually lower than the past three-year average of September quarters’ 6% growth (excluding the post-covid slump’s “sharp rebound” in 3Q20).

White expects digital ad trends to stay “healthy,” although past Facebook’s ad sales cycle peak. This took place last quarter, when Facebook boasted 56% growth; White expects ad revenue to be up 39% YoY in Q3. However, the analyst does note 2Q21’s growth was “inflated” given the easy comps with 2Q20 when digital ad spending “plummeted” as the pandemic took its early toll.

For 4Q21, White is expecting sales of $36.09 billion and EPS of $4.52 – both above the respective consensus estimates of $34.92 billion and $4.06.

All in all, the 5-star analyst sticks to a Buy rating, backed by a $500 price target. There’s upside of 46% from current levels. (To watch White’s track record, click here)

White’s stance is a popular one on Wall Street; 26 other analysts remain positive on FB’s prospects and are countered by 5 Holds and 1 Sell, all culminating in a Strong Buy consensus rating. The forecast calls for 12-month share gains of 24%, given the average target stands at $422.88. (See Facebook stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.