FB - Embedded Expectations Analysis - 2021 08 26
Facebook, Inc. (FB:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 22.9x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about their advertising business, growth trends in verticals, and their platform usage.Specifically, management may have concerns about decelerating revenue growth, the
profitability of the ads business for their Shops platform, and increased spending pressures in the creator space. In addition, they may lack confidence in their ability to preserve daily service usage, sustain advertising revenue growth, and maintain growth trends in verticals such as travel, entertainment, and media. Also, management may be exaggerating the potential of their metaverse investments, opportunities in the podcast space, and the positive impact of their personalized algorithms on social feeds. Moreover, they may have concerns about the impact of ATT changes on the advertisement business and increasing G&A expenses driven by employee-related and legal expenses. Finally, management may lack confidence in their ability to broaden their range of offerings of content and experiences and maintain profitable conversion rates for advertising partners.
Facebook is building and engaging products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and in-home devices. The company's products include: Facebook, which enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers; Instagram, which is a place where people can express themselves through photos, videos, and private messaging, and explore their interests in businesses, creators and communities; Messenger and WhatsApp, which are messaging applications; and Oculus, which connects people through its Oculus virtual reality products.
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