Institutions Extremely Bullish on Facebook (FB) Stock After Strong Q3 Earnings Report

November 1, 2019 13:30 UTC
  • Facebook printed solid Q3 earnings.
  • New formats like Stories are driving ad revenue growth.
  • At least 12 brokerage firms are bullish on FB after seeing the Q3 earnings report.

Facebook appears to be adhering to its motto to move fast and break things. The social media giant continues to perform well even in the midst of backlash, multi-billion dollar settlements, and lawsuits. Its recent earnings report shows that growth at the expense of some legal trouble can be worth it.

Shares of the tech company climbed on Thursday after encouraging Q3 earnings report. The stock reached a high of $198.09. The surge was good enough for a 5.2% increase from the previous day’s close of $188.25.

Although the stock retreated before the trading day closed, numerous institutions either hiked or reiterated their bullish rating for the company. These signals tell us that Facebook continues to assert its dominance in spite of several scandals.

Solid Third-Quarter Performance Reveals Facebook’s Unstoppable Growth

Facebook has been slapped by a $5 billion fine by the Federal Trade Commission (FTC) due to its violations involving user data collection. On top of that, the tech company recently forked over $40 million to advertisers to settle a class-action lawsuit.

Despite all that, Facebook printed third-quarter earnings that topped analysts’ expectations. The company posted earnings per share of $2.12 versus consensus estimates of $1.91 per share. In addition, revenue of $17.65 billion surpassed projections of $17.37 billion. Also, the tech firm’s daily active users (DAUs) of 1.62 billion exceeded predictions of 1.61 billion. Lastly, its average revenue per user of $7.26 eclipsed analyst forecast of $7.06.

Facebook’s DAU is on a steady uptrend. | Source: TechCrunch

According to CNBC, the social media company relied on Instagram and new content avenues such as Stories to boost revenue. Facebook has also put together a line-up of new revenue streams. For instance, Workplace – Facebook’s business communications platform – has hiked its fees for premium users. In addition, the social media firm will begin to take as much as a 30% cut on fan subscriptions in 2020.

These developments tell us that Facebook is a company that continues to grow at an impressive rate considering its size. Thus, it doesn’t come as a surprise that a good number of brokerage firms are bullish on the company.

Institutions Urging Their Clients to Buy FB Shares

The strong third quarter earnings plus new income streams may have prompted some brokerages to take a bullish stance on the stock. For instance, Mizuho reiterated its “Buy” rating on the stock with a target price between $240 and $247. The global investment bank even labeled Facebook as its “Top Pick.”

Mizuho sees Facebook as a worthy number one pick.| Source: Nasdaq

Other financial institutions expect Facebook to climb as high as $270. Credit Suisse has a “Neutral to Outperform” rating with a target price between $260 and $270. The Royal Bank of Canada also has a price target between $260 and $270 while rating FB as “Outperform.” Other institutions have price targets below $270 but they remain bullish on the stock.

Financial firms that are bullish on Facebook after strong Q3 performance. | Source: Nasdaq

At current prices, Facebook appears to have an upside potential of over 40%, according to the above-mentioned institutions. That’s a lot of room for growth for a tech company beleaguered by scandals and lawsuits. It seems that the motto to move fast and break things is working well for the company.

Disclaimer: The above should not be considered trading advice from CCN. The writer does not own Facebook stock.

This article was edited by Sam Bourgi.

Last modified: November 1, 2019 13:02 UTC

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@kirilnikk123

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. Follow the author on Twitter @kirilnikk kirilnikk123@gmail.com