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Facebook Inc A FB

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Facebook Reports Impressive Q1 Results; Digital Ads Demand Remains Strong; Increasing FVE to $390

Ali Mogharabi Senior Equity Analyst

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.

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Company Profile

Business Description

Facebook is the world’s largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Facebook operates at a 30%-plus margin.

1601 Willow Road
Menlo Park, CA, 94025
T +1 650 543-4800
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 60,654