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Facebook Stock: Wall Street Ratings and Sales Growth Estimates

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Analysts’ recommendations for Facebook

Of the 49 analysts tracking Facebook (FB), 42 have given the stock a “buy” rating while six rated the stock a “hold.” Only one analyst has recommended a “sell” rating. Analysts have generated an average target price of $222.52, which indicates that the stock has an upside potential of 18.6% from its current levels.

Facebook’s expected growth rate

Analysts expect Facebook’s earnings to fall 6.2% for 2019 due to higher expenses and security costs for its core platform. Also, a penalty of $3 billion, which the company has set aside to pay US regulators during the first quarter, will hurt earnings growth in 2019. However, earnings are expected to grow 31.8% to $9.36 per share in 2020.

Plus, Facebook’s near-term sales are projected to see strong growth. Revenues are also expected to grow 24.4% and 21.3% in 2019 and 2020, respectively. Facebook’s revenue growth has been declining over the past four quarters due to softness in user growth, hit by privacy issues and other scandals. The company’s revenue growth is expected to keep falling in the second half of 2019.

Advertising revenue

Facebook derives most of its revenues from advertising, which is growing at a sluggish pace as the company has been investing in its lower-ad-margin Stories feature instead of Facebook and Instagram feed ads.

Meanwhile, the company expects to earn ad revenues from its Watch video platform and Instagram in the coming years. Facebook’s advertising revenues grew 26% year-over-year in Q1 2019. According to a KeyBanc Capital Markets estimate cited by Vox, Instagram is expected to contribute significantly to Facebook’s advertising revenue by 2020.

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