by Ryan T. Calhoun
Earlier today, Moffett Nathanson, the very firm that gave the stock of Facebook (FB) a vicious downgrade in September last year, upgraded the stock to a strong buy, assigning it a price target of $210.
Are they right? I certainly think so. To me, Facebook is incredibly inexpensive, selling for just 19 times forward earnings estimates, a real bargain for such a high quality growth name. To review the history, last year Facebook stock got slaughtered in July when they reported a horrendous quarter in which they missed not only on the top and bottom line, but revealed a large increase in expenses relating to dealing with security, which caused the stock to fall greatly, especially as this was coupled with management’s commentary on decelerating revenue.
Since then, Facebook reported a mixed quarter in October, then two consecutive stellar blowout quarters in January and April of this year. The upgrade today from Moffett confirms one thing: Facebook is back, and it is not going away.
It seems that ever since last year’s disaster in July that investors have gained more confidence in Facebook’s ability to reach its estimates again. Put another way, Facebook’s awful second quarter last year and horrendous guidance was really just a reset and a way to set the stage for the following years of the company. We are now seeing New Facebook with its new model. And love Zuckerberg or hate him, love his company or hate it, it is working like a charm.
Disclosure: Calhoun is long FB
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