Stock in Facebook fell about 5% on Friday.
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Facebook shares gave away early gains as Wall Street weighed up a mixed earnings report from the social-media giant. The impact of Apple’s advertisement-tracking changes wasn’t as bad as some analysts had feared, but the company isn’t out of the woods.
After trading as high as $330.21 shortly after the market opened, Facebook stock (ticker: FB) was down 5.1% to $311.93 in Tuesday afternoon trading. The S&P 500 index was up 0.2%.
Raymond James analyst Aaron Kessler cut his target for the stock price to $410 from $450, but maintained a Strong Buy rating on Facebook shares. He said that though revenue fell short of the consensus call among Wall Street analysts, investors likely were expecting an even lower number. Earnings from Snap (SNAP), disclosed late Thursday, showed a hit to revenue from changes to Apple’s iOS operating system that make it harder for advertisers to tell how well their ads are working.
Stock in Facebook fell about 5% on Friday even though the company has said for months that it expected a financial hit from Apple’s move. Both Snap and Facebook depend on sales of online ads.
The company said it expects spending on the Facebook Reality Labs virtual and augmented- reality business—it will begin reporting the unit’s results separately from its core social-media business starting in the fourth quarter—to reduce its overall operating profit in 2021 by about $10 billion. While that is a larger investment than UBS analyst John Hodulik had anticipated, he said the disclosure implies the core Facebook business is performing better than expected.
During the company’s earnings call, CEO Mark Zuckerberg outlined the company’s aspiration of creating the metaverse—an always online virtual world with its own commerce and social interaction components.
“Our goal is to help the metaverse reach a billion people and hundreds of billions of dollars of digital commerce this decade,” Zuckerberg aid. “And strategically helping to shape the next platform should also reduce our dependence on delivering our services through competitors.”
Zuckerberg is set to speak more about the topic at a Facebook event on Thursday. For investors willing to value the company in terms of operating income from its core segment, Hodulik wrote, “one could argue shares are undervalued with a path higher given transparency into higher core profitability.”
Truist analyst Youssef Squali maintained a Buy rating on Facebook but cut his price target to $400 to $425 following the report. He said that while the third-quarter revenue and fourth-quarter outlook were lower than consensus estimates, they were better than feared.
“We remain constructive on FB despite ongoing headwinds from iOS changes which are making ad targeting/measurement more challenging, but which are transitory, not structural in our view,” Squali wrote.
The latest results reflect sustained user and advertiser engagement despite recent negative headlines surrounding the company, according to Squali. On Monday, more than a dozen news outlets published reports on a trove of internal data and documents, first reported on by The Wall Street Journal. that whistleblower Frances Haugen has submitted to lawmakers, regulators, and journalists
Not every bullish analyst cut their target. BofA Securities analyst Justin Post raised his call to $400 from $385 and maintained a Buy rating on the stock. He said earnings per share from the core business may be higher than expected in 2022, not counting the Facebook Reality Labs investments.
Write to Connor Smith at [email protected]
