Analyst Note| Ali Mogharabi |
Facebook posted impressive first quarter results with the top and bottom line beating our expectations and the FactSet consensus estimates. Economic recovery is driving higher ad spending, mostly digital, with behemoths Facebook and Google continuing to benefit. Ad prices again increased even as inventory continues to grow, indicating stronger advertising demand for Facebook and Instagram. Revenue growth, along with a lower bad debt allowance versus last year, expanded margins during the quarter. We expect an economic recovery will benefit small and medium-size businesses, the majority of which will likely prioritize digitization, sending ad dollars to Facebook and Google, which should fuel strong growth throughout 2021. Management guided second quarter revenue above expectations and provided guidance on operating expenses that implies slight margin expansion this year based on our revenue growth assumptions.