Facebook in the second quarter doubled its net profit and revenue by 56%. Net income in April-June was $ 10.394 billion, or $ 3.61 per share, compared to $ 5.178 billion, or $ 1.8 per share, received in the same period last year. Revenue increased to $ 29.077 billion from $ 18.687 billion a year earlier, while advertising revenues increased by 56% – to $ 28.58 billion. The market consensus assumed earnings growth to $ 3.04 per share on revenue of $ 27.85 billion.
TIKR
FB
PRICE
$373
TARGET PRICE
$415
UPSIDE
11%
The number of users of the social network Facebook (account activity at least once a month) reached 2.9 billion people at the end of June, having increased by 7% over the year. The number of daily active users also increased by 7% – to 1.91 billion. According to the company, about 2.76 billion people in the world use Facebook, Instagram, WhatsApp or Messenger every day, and about 3.51 billion people – at least once a month. Both of these indicators grew by 12% over the year.
Investors were somewhat disappointed that the company had warned that revenue growth would slow for the rest of the year. The company’s management said that revenue growth is expected to slow significantly year-on-year in the third and fourth quarters of 2021, driven by the eased impact of the COVID-19 pandemic, as well as regulatory and platform restrictions. In particular, the launch of a new version of the operating system for Apple devices – iOS 14.5, which implements a new policy for protecting user data, will create problems for the targeted advertising industry.
Facebook’s dominance in social and display advertising, combined with a client base of over 10 million small and medium-sized advertisers, makes Facebook one of the largest beneficiaries of the digital transformation of traditional corporate advertising. Strong traffic to the Facebook and Instagram apps continues to drive healthy monetization growth through ad impressions, while ad price increases will continue amid strong demand due to economic recovery. We believe Shops, WhatsApp, and Oculus have tremendous growth potential, and Facebook remains a leader in areas such as social advertising, messaging, and virtual reality.
Among the main catalysts for the growth of Facebook’s capitalization, we single out the following growth factors. First, we expect to see growth in mobile and video ad revenues, as well as monetization of the Instagram platform. Secondly, Instagram will continue to grow its user base not only in 2021, but also in the long term. Finally, thirdly, we believe that management gave a rather conservative estimate for 2H21. We believe that the ongoing Covid-19 situation will support the business as a whole. We are raising our target valuation for the company’s shares from $ 400 to $ 415.
Facebook is engaged in building products to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them to the people they care about. Developers can use the Facebook Platform to build applications and Websites that integrate with Facebook to reach its global network of users and to build personalized and social products. It offers advertisers a combination of reach, relevance, social context and engagement.