And just like that, almost $230 billion worth of Meta (FB) stock is gone. It would not be an understatement to say the Street was not expecting Facebook to miss so badly in its latest quarterly report. While the company managed a slight beat on the top-line, investors fled to the exit gates faster that you can say “like” after the social media giant’s outlook came in way below the estimates.
The company’s guide for 1Q22 came in 8% shy of Wall Street’s forecast and you can partly blame Meta’s next-door neighbor in the FAAMNG group for that. Apple’s iOS privacy changes are expected to result in a $10 billion revenue hit in 2022; the App Tracking Transparency feature lowers advertisers’ targeting capabilities on Facebook and Instagram.
That was not the only bad news. Marking a first in its 18-year history, DAUs sequentially fell – from 1.930 billion in the previous quarter to 1.929 billion in Q4.
And that could be down to the increasing competition from rivals like TikTok and YouTube, which could signal – as the company cautioned – a slow down on the revenue growth front.
The company has pledged to fight back against the growing competition with Meta banking on the continued success of its TikTok retort – Instagram’s Reels. As JMP’s Andrew Boone notes, the short-form video format has been the “largest engagement growth driver on Instagram while also being one of the fastest-growing formats on the Facebook app.” And in the past, Facebook has “successfully navigated similar shifts (web to mobile and Feeds to Stories),” and Boone thinks it has the tools to do so again.
While the analyst acknowledges the “the reset in revenue growth,” he lay outs the bull case. “Facebook has multiple catalysts to reaccelerate as we believe social commerce is at an inflection point, Reels can increase usage and monetization, and new ad tools help to restore targeting and measurement capabilities,” he confidently said. “This as Facebook remains the most scaled social platform with 2.8B highly engaged, daily users and best-in-class first-party data and ad formats.”
So, what’s an investor to do? According to Boone, one should “take advantage of the pullback.” To this end, Boone reiterated an Outperform (i.e. Buy) rating along with a $350 price target. There’s upside of 43% from current levels. (To watch Boone’s track record, click here)
The Street’s analysts have been busy assessing the Meta shocker but the majority still back its continued success; the stock has a Strong Buy consensus rating, based on 22 Buys vs. 6 Holds. Going by the $343 average target, the shares are expected to be changing hands for a 39% premium a year from now. (See FB stock forecast 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.
