This post was originally published on this site
The higher price target reflects higher 2023 EPS estimates by 6%, although still below the consensus. Higher EPS comes on lower opex estimates, despite the fact that Walmsley also slashed revenue estimates for FB on the back of the Russia/Ukraine war and management comments.
“We think Street ests will move down in preview season, but we view this as largely expected by investors. We believe Instagram Newsfeed changes and improving Reels content/algo can drive better engagement that we expect to monetize later in 2022 and in 2023,” the analyst said in a client note.
On what may send FB shares higher in the context of the Q1 earnings report, Walmsley mentions any improvement in engagement data and/or commentary to this effect.
While the timing is unclear, we think a ramp in Reels monetization, easing comps, and improvements in targeting/measurement can drive the multiple back towards its 3-year average of a ~9% premium to the S&P 500, or 22x P/E (vs 16.8x on our GAAP 2023 est), the analyst added.
By Senad Karaahmetovic
