For the most part, shares of Facebook (NASDAQ:FB) have recovered from an onslaught of scandals and months of negative storylines about the company, tapping all-time highs last month. The great irony was that the controversies only proved how effective the company's advertising machine is. There doesn't appear to have been a sustained impact on user metrics -- despite some outrage, Facebook users are largely unperturbed.
That resilience is one reason why BTIG Research is boosting its price target on Facebook to $275.
Facebook users "simply could not care less"
Facebook recently tweaked its News Feed algorithm in a way that prioritizes social content from friends over publisher content, and this shift appears to have accomplished its stated goal: Enabling more meaningful interactions with friends and family. In a research note today, analyst Rich Greenfield believes the core Facebook experience has indeed improved, and that "consumers simply could not care less" about the scandals.
Echoing other analyst sentiments, Greenfield is also extremely bullish on Instagram, which now has 1 billion users. The Instagram Stories feature alone now has 400 million daily active users (DAUs), or over twice the size of all of Snap's Snapchat. Instagram monetization is still "in the early innings," according to Greenfield. The analyst also notes that Instagram is getting close to "the marketing/advertising holy grail," where ads are nearly indistinguishable from content. That speaks both to the service's visual nature as well as its budding e-commerce opportunities.
The new IGTV long-form video service is also off to a strong start, with Greenfield impressed by how much content is already in IGTV.
Greenfield is raising his estimates for Facebook and is now modeling for the social networking giant to generate $57.3 billion in revenue for 2018 (up from his prior estimate of $51.1 billion). EBITDA this year should be approximately $35.6 billion (up from his prior estimate of $31.4 billion). Revenue for 2019 is expected to be $75.7 billion, with $45.2 billion in EBITDA.
BTIG's price target for Facebook is getting bumped by a full $100, from $175 to $275. That price target is based on an EBITDA multiple of 15 times 2020 EBITDA, which Greenfield models at $54.3 billion. BTIG's new price target represents roughly 40% upside from current levels and is also above the $225 average price target across all analysts.
"We continue to view Facebook as a must-own stock to maintain exposure to growth of mobile time spent," Greenfield concludes.