Skip to main content

FB stock forecast 2022: Facebook’s latest earnings report analysis

Facebook

Today I will interpret its just-announced financial report for the second quarter of 2021.


combined with the digital advertising industry's general development direction and competitive landscape.

First, let’s summarize Facebook’s latest earnings report.

I think Facebook’s second-quarter earnings report is very, very good. We can see how good it is from year-on-year and quarter-on-quarter. Revenue in the second quarter increased by 56% year-on-year, while it increased by 48% year-on-year in the first quarter. Operating profit in the second quarter increased by 107% year-on-year, while the first quarter increased by 93% year-on-year. 

Net profit increased by 101% in the second quarter, compared with a year-on-year growth of 94% in the first quarter. Earnings per share in the second quarter increased by 101% year-on-year, while the first quarter increased by 93% year-on-year. The operating margin in the second quarter was 43%, compared to 32% in the same period last year. The performance was far better than market expectations, with significant improvements both year-on-year and month-on-month.

I think it can be used to describe the dazzling financial report of Facebook. Of course, the significant year-on-year improvement in performance this time is also related to the worst period of the epidemic in the United States during the same period last year. The base figure last year was relatively low because many companies have cut their advertising expenditures in the face of the uncertainty of the epidemic.

In addition to Facebook’s beautiful financial data.


let’s analyze and discuss several other data in the financial report and give my opinion:

1) The number of daily active and monthly active users has maintained steady growth, about 7%. This shows that Facebook is still attractive to a new generation of young Internet users. The only fly in the ointment is that the daily and monthly active numbers of the United States and Canada have stopped growing for two consecutive quarters. 

In addition, the daily activity and monthly activity in Europe have experienced a month-on-month decline. This is also the reason why Facebook's stock price has fallen after the announcement of its financial report. This is how I understand it. Don’t forget, in the third and fourth quarters of 2020, the daily and monthly active numbers of the United States and Canada have declined.

At the time, everyone was worried about deleting Facebook accounts. The movement may have affected Facebook. At present, even in the saturated US and Canadian markets, the number of active users has basically stabilized in the developed markets of North America and Europe. In terms of growth, we cannot expect too much. The future growth of users mainly depends on developing regions such as Asia, Africa, and Latin America, and these regions have great growth potential.

2) Looking at ARPU again, it is the average revenue per user. The world average ARPU is US$10.12, a year-on-year increase of approximately 28%. The markets in the United States and Canada, Europe, and the Asia-Pacific region have all achieved steady and positive growth. Therefore, on the one hand, the number of Facebook users is growing relatively steadily. On the other hand, the revenue generated by each user has grown steadily. It is these two growths that have jointly promoted the rapid growth of Facebook's total revenue.

3) Looking at regional revenue, even in the relatively mature US and Canadian markets, its revenue still achieved year-on-year growth of 60%. This growth shows that the stamina is very sufficient. Generally speaking, the relatively mature North American market takes the lead in the digital advertising market. In the future, other digital advertising markets that are not very mature will take over. This ensures the sustainability of Facebook's revenue growth in the next few years.

Some people worry that Apple's privacy settings will affect Facebook's advertising, what should investors think?


This change is "one of the major advertising business resistance" that Facebook may face this year.

I personally think that investors’ worries are basically unfounded. From a technical point of view, Facebook has various ways to collect user information. Such as knowing your location through GPS, and understanding your social relationships through your friends. Through your sharing to understand your hobbies, through your dialogue information to understand your trends, and so on. Facebook knows that your information is the most, the most complete, and the most accurate in all applications.

In fact, I may know you better than Google. When you search on Google, you may not log in. The information on Facebook is basically real names. Even if Apple controls privacy, Facebook has tens of thousands of ways to make you clear and recommend the most suitable ads to you. And the longer you stay on the Facebook platform, the more accurate Facebook will understand you. Therefore, Facebook ads will become more and more accurate over time.

As an investor, there is really no need to make a fuss about Apple's privacy settings and the future Android privacy settings. I think this is Facebook's strategy. If the performance is not satisfactory in the future, you can give it to Apple. Also, Facebook has always had a tradition of scaring investors at financial report conferences. A few years ago, Facebook told investors that they would hire a large number of people to manually review content, which would cause operating costs to skyrocket. At that time, when many investors talked about Facebook, they were just talking about the surge in operating costs.

Looking at it now, this negative news has been completely forgotten. This time Facebook warned investors that it expected the future growth rate to fall sharply. Many investors are starting to worry again. I think this is nonsense. The growth rate of 56% this quarter is due to the low base last year. The future growth rate can't reach 56%. So, don’t worry too much. I think investors need to see the big trends and ignore these unimportant, partial, and small factors so that they can be confident about the future of Facebook.

Finally, talk about how to invest in Facebook, can you still buy it now?

  
I am very optimistic about Facebook and believe that Facebook is worthy of long-term investment and the downside risk is relatively small. You can simply estimate its price-to-earnings ratio in this way, the current stock price divided by this quarter's earnings per share multiplied by 4, that is, 356 divided by 3.61 multiplied by 4 equals 24.65 times. For a company with a 56% year-on-year increase, the P/E ratio is 24.65 times, which is basically the lowest in FAANG.

For companies with this revenue and profit growth rate, this price-to-earnings ratio is within a reasonable or even underestimated range. Therefore, it is very safe to hold Facebook for a long time. From the beginning of the year to now, Facebook's stock price has risen by about 30%, especially before the performance is reported.

It is quite normal for the stock price to adjust after reporting the performance. As a long-term investor, you should completely ignore Facebook's short-term fluctuations. I am confident that Facebook's share price has good room to rise in the future. As an investor who has already invested in Facebook, the best strategy is to hold it or not. As an investor who intends to buy, if you think you can take it for more than two years, it doesn't really matter what price you enter.

Why am I more optimistic about Facebook?


I think we can analyze from the big industry development trend and growth space. I think the ceiling for Facebook's growth is very high, and it is far from reaching the ceiling.

1) The transformation of human beings to digital advertising is still continuing, and the digital advertising market is still growing. Facebook is basically a duopoly of digital advertising, and there are still opportunities for continued growth. In this financial report, Google, Snap, and Twitter performed well. It shows that digital advertising as a whole is a good business, a good industry, and a good track.

2) Facebook has no decent competitors in the international market. North America takes the lead, and other markets will gradually follow the North American market in the future. There is still a lot of room for international expansion. There are still many places in the world that restrict the use of Facebook due to slow networks and poor mobile phone performance. 

With the improvement of infrastructure in the future, the penetration rate of Facebook as a typical Internet application will definitely become higher and higher. There are a series of apps, some of which have not been monetized through advertising, so Facebook has a lot of room to monetize these platforms in the future.

3) Facebook is monetizing through other means, such as e-commerce, etc., it can cooperate with Shopify or directly open a store to enter e-commerce. There is still a lot of room for revenue growth outside of advertising in the future.

4) There are many opportunities for Facebook to do electronic wallets and so on. Facebook’s advantage in Fintech, if it is said that Facebook’s biggest risk, is antitrust. However, this is a commonplace question. 

At present, Facebook’s stock price, I believe, has taken into account the impact of antitrust, which is one of the reasons why Facebook’s long-term price-to-earnings ratio is relatively low. From the worst point of view, even if Facebook is split, the combined valuation of Facebook, Instagram, and WhatsApp may be higher than the current valuation of Facebook.

In short, antitrust is indeed Facebook’s omnipresent Damocles sword, but don’t worry too much. Even a substantial adjustment in Facebook's stock price caused by antitrust is often a good time to enter and increase positions. History has proved this many times.

Comments

Popular posts from this blog

TSM Stock Forecast and Price Target 2021

Today, I will analyze TSMC stocks in-depth with you. In the semiconductor sector, TSMC has always been my most promising stock. TSMC has just announced its results for the fourth quarter of 2020. At the same time, there are new developments in the entire chip industry recently. Therefore, today I will combine the financial report and chips. The latest developments in the industry to analyze the trend of TSMC stocks, First of all, we analyze TSMC’s fourth-quarter and full-year 2020 financial reports to see what are the key points worthy of investors’ attention. First, TSMC’s fourth-quarter revenue and profitability are very good.  Compared with the outlook for Q4 in Q3, the outlook at that time was US$12.4-12.7 billion, and the actual revenue was US$12.68 billion. Actual revenue As the upper limit of the outlook, the gross profit margin outlook is 51.5%-53.5%, while the actual gross profit margin is 54%, which is better than the outlook. The operating net profit margin is expected to be

INTC stock forecast 2025: Intel's acquisition of SiFive

SiFive, a chip design start-up company based on the RISC-V instruction set architecture, has received an acquisition intention from investor Intel.  A person familiar with the matter, who asked not to be named, said that Intel has offered to buy SiFive for more than $2 billion.  RISC-V with x86 and Arm  As we all know, Intel dominates the industry leader in x86 architecture chip technology, while SiFive focuses on open-source RISC-V technology and employs several founding members of the RISC-V architecture.  For a long time, the field of CPU instruction set architecture has been dominated by x86 and Arm. Since RISC-V was born at the University of California, Berkeley in 2010, it has gradually formed a certain competitive landscape with Arm after more than ten years of development.  With the gradual refinement of the application field, the model of one chip making the world has become a thing of the past. Facing the hot AI and Internet of Things market, RISC-V is becoming a semiconduct

Shopify stock forecast 2025:Is it worth buying?

  In the last year, the stocks rose relatively well. Another sector is e-commerce. Whether it is Amazon, Alibaba, JD.com, Pinduoduo, SEA or vertical e-commerce platforms Etsy and Chewy, all of them have experienced huge gains, while another category has benefited from the e-commerce sector.  The company is a website building tool company such as Shopify BigCommerce Holdings. Today I will talk about shopify, the leader of website building tools.  First, let's briefly talk about shopify's business model. To put it simply, shopify is a fool-like website building platform. In the past, when a company wanted to build a corporate website, it generally needed to find a dedicated person to design and maintain the website.  If you want to add shopping functions to the website, the cost of building the website will also increase. This is true for many small businesses and individual businesses.   A very difficult thing. Shopify uses the SAAS model to provide website building services.

Cloudflare's 4Q 2021 earnings report

 Just took a look at Cloudflare's (NET) 4Q 2021 earnings report. Cloudflare is in an area that covers several hot spots, including content delivery networks, i.e. CDNs, cloud computing, and cybersecurity. For the Cloudflare quarterly report, here is a summary: 1) Revenue of $194 million (then expected 4Q revenue in the range of $184 to $185 million), up 52% year-over-year ($172 million in 2021, up 51% year-over-year). 2) The number of customers continues to grow rapidly, with the total number of customers has reached 1416 (1260 in the previous quarter). 3) Non-GAAP gross margin was 79.2% vs. 78.1% in the same quarter last year (vs. 79.2% in 3Q vs. 77.3% in the same quarter last year.) Non-GAAP net income has started to turn around, meaning it has started to be profitable. 4) Revenue is expected to be in the range of $205 to $206 million in 4Q. That works out to about 6% YoY growth. Cloudflare had good results this time, beating its previous guidance. Revenues are still growing at a

TSMC VS Nvidia, AMD, Intel. How to choose semiconductor stocks?

The general pattern of the semiconductor industry, the overall trend and target price of TSMC in 2021, how the Nvidia(NVDA), AMD, and Intel(INTC) semiconductor stocks are laid out, what is the decisive factors, and whether there is a predictable time point, we conducted a more systematic discussion.  The big picture of the semiconductor industry The semiconductor industry is cyclical. Since the second half of 2019, global semiconductors have entered a new round of the business cycle. This is very important. Only when you understand this reason can you hold stocks with peace of mind. The following analysis is based on the time dimension. In the short term, looking at one to three months now, with the outbreak of the epidemic again, the production capacity of 8-inch wafers are in short supply, the semiconductor industry chain is out of stock, wafer foundry, packaging, and testing links have seen price increases, and production capacity is in short supply. High economic situation, In the

PLTR stock forecast 2025: Cathie Woods increased Palantir stock position

Software company Palantir (PLTR) released the latest quarterly earnings report, which performed very well.  After the financial report, Palantir's stock price soared to 14.64% at the highest point. At the same time, the keen Cathie Woods also bought $140 million in Palantir stock.  I won't talk about Palantir's specific business. If you don't know much about it, you can go back to my previous article.  Let's talk back to the financial report.  Benefiting from the benefits of the US government’s contract renewal, Palantir’s earnings per share and total revenue both beat expectations for this quarter’s earnings report.  Among them, earnings per share were $0.04, beating the expected $0.01; total revenue was 376 million, an increase of 49% from the same period last year, slightly higher than the expected $361 million.  Although the extent of beating expectations is not very large, the biggest highlight of the financial report is to broaden the business.   The value of

ARKK VS ARKW, ARKQ, ARKG, ARKF, How to choose ARK Innovation ETF?

Which ARK Innovation ETF is best? Let’s perform an Ark ETF review. Today, I will introduce to you the five actively managed ETFs in ARK INNOVATION. Let’s take a look at which types of companies they have invested in so that you can choose the industry you like to invest in. ARK INNOVATION was founded by Catherine Wood. This investment company is a revolutionary and innovative company that specializes in investment. Their company currently manages seven different types of ETFs, five of which are actively managed ETFs, and the other two One is an exponential passive ETF, Simply put, the biggest difference between these two ETFs is that for actively managed ETFs, they will frequently trade the company stocks in the fund, so the proportion of the company he holds will always change, while the index-type ETF is as they think. After purchasing the company, you will not be able to move it again. It is very similar to S&P500 or QQQ, except that the holding company is different. Then let

7 great investors' operating strategies to deal with the stock!

No one can be 100% sure about the outlook for the US stock market. Instead of entangled in whether the bull market in US stocks will end, it is better to think about what lessons can be learned from this plunge. Historically, due to the end of the summer market in September, U.S. stocks did not perform well. The plunge on Thursday sounded like a wake-up call for investors earlier. Be careful next week. Although Nasdaq is tolerant of faults The rate is high, but the up-and-down shock pattern has not changed, and there needs to be an established process. Investing in stocks should take a long-term view, have a long-term investment mentality, don't care too much about the rise and fall of one or two days, and don't feel unhappy because of the turmoil of the stock market, which affects the judgment of stock buying and selling. Today, let's take a look at how those familiar investment masters are invincible. The reason why masters become masters is that they have become masters

SNAP stock forecast 2025: Is it time to buy Snapchat?

In the US social networking industry, there are four listed companies. They are the famous Facebook, former US President Trump's favorite information publishing platform Twitter, photo sharing and social networking site Pinterest, and Snapchat, which is popular among young people. Most of them are between 25 and 55 years old and have used Facebook products more or less. But it is very new to Snapchat. In fact, Snapchat is a powerful challenger for Facebook. The greatest charm lies in rapid growth. In the past year, the stock price has risen from US$20 to more than US$70, and the company is now worth more than US$100 billion. Snap was founded in 2010 and is headquartered in California. The company's flagship product, Snapchat, is photo sharing and social networking software. The software comes from a "burn after reading" photo-sharing application developed by two students from Stanford University. In April 2011, founder Evan Spiegel introduced the idea of ​​his final p