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Why Facebook Stock Jumped Today

By Joe Tenebruso – Updated Oct 12, 2020 at 4:26PM

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A recovering online ad market bodes well for the social media giant.

What happened

Shares of Facebook (META -1.45%) climbed 4.3% on Monday, following bullish analyst remarks.  

So what

Deutsche Bank analyst Lloyd Walmsley reiterated his buy rating on Facebook's stock and boosted his price forecast from $305 to $325. His new target represents potential gains for investors of roughly 18% from Monday's closing price of $275.75.

A person is pointing to a chart that rises, then falls, then rises again.

Analysts say a recovery in the digital ad market could drive Facebook's stock to new highs. Image source: Getty Images.

Walmsley believes a recovery in the online advertising market is underway, one that he expects to accelerate into the fourth quarter. In turn, he sees Facebook's revenue growth accelerating and its profit margins strengthening in the year ahead.

Moreover, as a large-cap stock, Walmsley argues that Facebook offers investors a more attractive risk-to-reward profile than its smaller competitors. 

Now what 

Despite the serious challenges Facebook faces in fighting hate speech and misinformation on its social media platforms, the ad titan remains well positioned to profit from the long-term growth of the digital advertising industry.

Digital ad sales are forecast to top $517 billion by 2023, up from $333 billion in 2019, according to eMarketer. That leaves plenty of room for expansion for Facebook, which grew revenue by 11% year over year to $18.7 billion in the second quarter. 

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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