Analysts voiced support for Facebook (FB) - Get Facebook, Inc. Class A Report Tuesday after the social-media titan beat Wall Street's third-quarter earnings expectations, but some pared their price targets.
Shares of the Menlo Park, Calif., company at last check were down 1.7% at $323.13.
Facebook on Monday posted stronger-than-expected third-quarter earnings, but fell shy on revenue. Apple's (AAPL) - Get Apple Inc. (AAPL) Report privacy changes and Covid-19 developments created "significant uncertainty" for the company's ad sales business.
Andrew Boone, an analyst with JMP, kept his outperform rating but cut his price target to $400 from $425.
Boon said the "results were better than feared as Facebook advertising revenue grew 32% year over year, [excluding foreign exchange impact], likely aided by the company’s continued investment in advertising tools, diverse base of 10-million-plus advertisers, and extensive first-party data."
"While Facebook has created a highly engaged audience of 2.8 billion people that use its family of apps daily, competition for a younger audience has increased," he said.
"To that end, the company plans to refocus its products on this audience, potentially to the detriment of engagement for its existing older user base."
FBN Securities analyst Shebly Seyrafi reiterated his outperform rating on Facebook and lowered his price target to $400 from $415, saying the company "has lowered expectations enough to beat expectations in the foreseeable future."
He said that when the company breaks out its Facebook Realty Labs as an operating segment, "the strong profitability of its 'Family of Apps' segment (FB, Instagram, WhatsApp, and other services) will become more readily apparent."
Oppenheimer analyst Jason Helfstein affirmed his outperform rating and $405 price target. He noted that small to medium business advertisers have limited choice in reaching digital consumers, suggesting more durable revenue.
"As users upload more personal information, this increases Facebook’s competitive position," he said.
"Given the fragmentation of media and communication, we believe consumers will increasingly find media and information through their social graph, positioning FB in the middle of this information exchange."
BMO Capital Markets analyst Daniel Salmon kept his outperform rating and $425 price target.
"We see AAPL’s rollout of the [app-tracking transparency] framework as marking the peak for FB’s 'headwinds from platform changes,'" he said.
"From here, we expect vertical integration for eCommerce (payments, shops, messaging, etc.) to help drive a narrative about FB having greater control over its revenue destiny."
Salmon said he expected Facebook to continue upgrading its ad platform with privacy-enhancing technologies and to invest in commerce and payments "to forge a more vertically integrated platform with a lower risk from platform changes."