UBS analyst Eric J. Sheridan and his team say Facebook’s stock — currently trading around $70 — is like a “snowball” that could hit a staggering $112 in the future.
Facebook stock is already up 32% this year and has been trading in a frothy region above the average of analysts’ price targets, according to Bloomberg. FB has rallied so quickly that analysts have struggled to upgrade their ever-higher price targets. Facebook stock at $70 has a price/earnings ratio of 114, compared with the average S&P 500 PE ratio of about 16.5, according to Factset. So we’re entering the stratosphere of valuations here.
In a note to investors titled “The Snowball Picks Up Speed,” UBS’ Sheridan, Vishal Patel and Timothy Chiodo point to several factors they think will drive Facebook’s stock into triple digits in the near future. (UBS actually has a $90 price target with an “upside scenario” of $112.)
First, Sheridan says that Facebook has restricted the “reach” of posts on advertisers’ Facebook pages so that just 6% of their followers see any given post. This “is acting as an impetus for greater ad spend as brand advertisers seek to maintain their audience.” Facebook has previously denied that it restricts the reach of brands’ pages on Facebook. Rather, it believes, the algorithm that controls which posts you see in your news feed is biased toward the posts that your friends also like and toward useful, newsy content.
Second, Facebook did a $100 million ad-! buying d eal with Publicis Omnicom Group, the giant ad agency holding company.
Third, Sheridan says that despite its reputation, Facebook still remains relatively ad-free:
We believe FB remains undermonetized relative to peers given the time spent on the platform, providing an opportunity for continued strong revenue growth as monetization improves. In particular, Facebook ads exhibit strong pricing power (+92% YoY in Q4) and ROIs remain excellent for FB’s advertising partners, suggesting significant runway for rising ad prices.
Sheridan also believes payment revenue from WhatsApp — users must pay $1 per year after their first year of usage — will help.
UBS has a downside scenario, too, of course. If the snowball melts, the stock would be worth only $55, Sheridan writes.
drag2share: This Chart Tells You Everything You Need To Know About The Current State Of The iPhone Business (AAPL)
Pacific Crest analyst Andy Hargreaves upgraded Apple to “outperform” this morning, citing the upcoming iPhone 6 as something that would pump up the stock.
In his note on Apple, he included this chart, which pretty much tells you all you need to know about the iPhone business.
The iPhone’s growth is slowing considerably as Apple shifts from taking on new iPhone owners to selling upgrades to current iPhone owners.
The problem for Apple is that its market of smartphone buyers appears to be largely saturated. Apple sells a premium product to wealthy customers. Those people have bought their iPhones.
The growth in the smart phone industry will come from less wealthy consumers who buy $100 smart phones in emerging markets. That’s not a market Apple wants anything to do with since there’s no money to be made.
And in case you need a reminder about why this matters to Apple right now, here’s a chart of how Apple makes money from Hargreaves:
So, what does this mean for Apple overall? Years of slow growth are ahead unless it releases a new product that radically stimulates sales.
6 in 10 online adults in the US and UK use at least 2 devices every day, while one-quarter in the UK and one-fifth in the US use 3 devices daily, reports GfK in the results of a study commissioned by Facebook. A large proportion of multi-device users sometimes start one activity on one device […]
Some brand marketers have questioned the value of mobile ad targeting. But according to a new eMarketer report, the state of mobile advertising is changing; multiscreen advertising and audience targeting are two tactics leading improvements in the space.
Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.
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