Mark Zuckerberg, CEO of Facebook
Drew Angerer | fake images
Morgan Stanley analysts said in a note on Friday that Facebook remains the number one choice among large-cap social media stocks, and that its investments and monetization efforts offset any drop in short-term commitment as the pandemic of coronavirus is nearing its end.
“We continue to be more positive on FB within the large-cap social media names as we see their leading ROI, product innovation, and monetization call options (reels, Marketplace, shopping, etc.) allowing them to navigate to through the tough headwinds of short-term engagement. ” said the firm.
Morgan Stanley also sees Facebook driving ad growth, helping the social media giant reduce engagement.
“We also found that even a slight increase in the News Feed ad load could offset any decrease in engagement. In our opinion, the extent to which FB can meet earnings may generate more than $ 16 of free cash flow per share next year, marking a path towards our bullish case of $ 440 (~ 30% up). Analysts said.
As Covid-19 pandemic restrictions are lifted, people are likely to spend less time on social media. The firm said that the lower use and participation of social media leads to the increasing importance of innovation and the price / ROI of ads. That will help drive ad growth and allow the company to beat estimates in the second half of this year and next.
“It will become increasingly important for social platforms to continue developing products (social shopping, short form video, maps, etc.) that drive engagement and deliver measurable advertising ROI that directly links ad dollars to transactions,” said the analysts. It is not a new dynamic, but it is of increasing importance in meeting or exceeding estimates.
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