Facebook Stock Forecast: Why Facebook Deserves A Price Target of $430

The Facebook stock forecast was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.


  • Facebook’s stock price is +55% since my May 24, 2020, bullish recommendation for it. I am again endorsing it as a buy. FB is much cheaper than TWTR and AMZN.
  • The impressive Q2 2021 beat convinced me Facebook’s stock deserves a price target of $430. This is slightly higher than TipRanks’ average PT of $416.07.
  • Q2 revenue was $29.07 billion (+55.5% Y/Y), beats by $1.1 billion. Q2 EPS was $3.61 (+100.6% Y/Y), beats by $0.61. The operating margin was 43%, higher than Wall Street’s expectation of 37.6%.
  • Cheap 5G smartphones and accelerated 5G network deployments are long-term catalysts for Facebook.
  • Facebook Video is now giving YouTube stiff competition in the $70 billion global online video advertising industry.

My May 24, 2020 buy recommendation for Facebook (FB) was very profitable. Facebook’s stock price is now +55% higher but I’m again endorsing FB as a buy. My 1-year price target for FB is $430. This PT is highly feasible, FB set a new 52-week high of $377 last July 28. The stock dipped by 4% post-Q2 earnings report. Many investors apparently are still worried about Apple’s (AAPL) App Privacy policy on iOS devices. My $430 1-year PT is also higher than TipRank’s average of $416.07.

(Source: Seeking Alpha Premium)

Going forward, I’m on Team Zuckerberg. Facebook, Messenger, and Instagram are free online apps. Zuckerberg is right that users of free apps are not the customers, they are the products. Apple should really be careful. Facebook has more than $64 billion in cash & equivalents. Facebook can create its own mobile/web ecosystem running on its future metaverse operating system.

Facebook’s Q2 was actually pretty amazing. Apple’s App Privacy did not hamper Facebook from earning $29.07 billion in revenue, beats by $1.1 billion. This is also 55.5% higher than Q2 2020’s $18.69 billion. ARPU or average revenue per user is $10.12, higher than Wall Street’s estimate of $9.66. Facebook’s monthly active users (or MAU) is 2.9 billion. Second-quarter EPS was $3.61, up +101.6% year-over-year and beat by $0.61. Facebook has done four consecutive EPS beats. These impressive Q2 figures convinced me that Apple’s App Privacy policy is not a headwind against Facebook’s expected forward annual revenue growth rate of 25.90%.

It is safe to assume that actual Q3 EPS will also be higher than the consensus of $3.13. Facebook will also likely beat the estimated 2021 EPS of $14.01.

(Source: Seeking Alpha Premium)

High-Margin Digital Advertising Is Still Growing Fast

Facebook is still the world’s no. 2 digital advertising giant. The global digital advertising business is expected to be worth $455.3 billion this year, and $524.3 billion in 2022. The double-digit growth rate of digital advertising convinced me that FB deserves a forward PE valuation higher than 25.44x.

   (Source: Statista)

As per eMarketer’s chart below, Google’s share of global digital advertising spending will decrease in 2022 and 2023. This is opposite from the expected growth of Facebook’s market share. From 23.7% share this year, Facebook will have a 25.2% market share by 2023.

(Source: eMarketer)

My fearless forecast is that Facebook’s market share in 2023 could be higher than 26%. Facebook Video is now also competing against YouTube Video. These two online streaming platforms now account for 49% of the $70 billion (2020 estimate) global online video ads. Facebook is obviously big money on its crowd-sourced video streaming platform, it promised to pay $1 billion in additional bonuses to its Facebook Creator contributors. Facebook Video’s emergence as a YouTube rival is very inspiring. Statista’s chart below shows digital video ads could be worth $91.5 billion this year.

(Source: Statista)

Facebook does not yet have its own mobile operating system as Google and Apple have. However, Facebook’s digital advertising growth is guaranteed. Facebook, Instagram, WhatsApp, and Messenger have given it 2.75 billion mobile active users. This massive presence among mobile device users is important because mobile advertising has the highest revenue CAGR of 21.6% among the 3 digital ad types.

(Source: Statista)

Facebook Is Relatively Undervalued

The increasing market share of Facebook in the fast-growing $378.16 billion/year advertising business convinced me that it deserves a higher valuation. It is a stock market abnormality that Twitter (TWTR) is not even among the world’s top 8 advertising players and yet it touts a Forward P/E valuation of 189.75x. Twitter also touts a higher TTM Price/Sales valuation than Facebook, 12.44 versus 9.68.

(Source: Seeking Alpha Premium)

The relative undervaluation of Facebook against its digital advertising peers is unfair. Facebook is still a high growth-stock investment. Yes, the Forward CAGR of 25.90% is lower than Facebook’s 5-year average CAGR of 34.44%. However, a 26% forward revenue CAGR is still considered in my book as high double-digit growth. Amazon’s forward revenue CAGR is also only 26.28% and its stock’s Forward P/E is 63.05x.

Facebook Stock Forecast: Final Thoughts

FB is a strong buy because of its erroneous undervaluation against its lower-ranked digital advertising peers. Facebook is more profitable than its advertising peers too. As per the chart below, Facebook has higher gross and net income margins than Twitter and Amazon (AMZN). Amazon’s e-B2C commerce business is a low-margin industry. In spite of the high operating profits of Amazon Web Services, Amazon’s net income margin is only 6.64%. Twitter’s net income margin is also low, 8.64%. Facebook’s advertising-centric business model gave it 37.18%. This is higher than no.1 digital advertising giant Google’s (GOOG) net income margin of 28.57%.

(Source: Seeking Alpha Premium)

Thinking forward, we can estimate that FB should finish 2021 with an EPS of $15. The better profitability numbers of FB should convince us that it deserves a forward EPS of 30x. Multiply these two and FB’s forward pricing is $450. This is higher than my 1-year price target of $430. I checked my Finbox premium account and that website’s DCF-focused AI algorithm gives Facebook’s stock a fair value price of $436.33.

(Source: finbox.io)

Lastly, my strong buy rating for Facebook is also supported by its bullish 1-year market trend score of 155.42. I Know First’s AI is very confident that FB will trade at price levels higher than $357 within the next 12 months.

Past Success With Facebook Stock Forecast

I Know First has been bullish on Facebook’s shares in past forecasts. On our May 24, 2020 premium article, the I Know First algorithm issued a bullish Facebook stock forecast. The algorithm successfully forecasted the movement of Facebook’s shares on the 1 year time horizons. FB’s shares rose by 37.51% in line with the I Know First algorithm’s forecast.

fb stock forecast - ikf forecast

Here at I Know First, our AI-based stock forecast algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. The database used is 100% historical data free from human-derived assumptions and is constantly evolving with newly added data and adapting to changing market situations. Today, we are producing daily forecasts for over 10,500 assets such as forex forecast, as well as gold predictions, while also providing the latest Apple stock news. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.

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