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Analysts are optimistic about Facebook (FB) stock amidst growing expectations of profitable earnings and a new class-action lawsuit.
The shares of social media giant Facebook Inc (NASDAQ: FB) closed Tuesday’s trading session with a 1.50% loss at $241.75. Today FB stock is also down 0.85%. This decrease may in part be attributed to the class-action lawsuit filed by Australian based cryptocurrency exchanges on the trio of Facebook Inc (NASDAQ: FB), Alphabet Inc (NASDAQ: GOOGL) and Twitter Inc (NYSE: TWTR) for banning cryptocurrency-related ads.
The downtrend came despite Rosenblatt Securities revising FB stock price to a new Wall Street high of $315 from $244 on Tuesday. The securities firm attributed the bullish call to Facebook’s revised revenue projections. As a result, investors can interpret positive estimate revisions as a good sign for the company’s business outlook.
As Facebook nears its next earnings release due on July 29, 2020, the social media giant will be looking to display strength to enhance the company’s financial position following two-quarters of global coronavirus induced business downturn. The company is expected to report EPS of $1.44, up 58.24% from the prior-year quarter. Meanwhile, the projected consensus estimate for Facebook calling for revenue of $17.31 billion, up 2.48% from the prior-year quarter.
Positive Inclination to FB Stock
Undeterred by the current performance of the FB stocks, analysts have maintained a position that has the potential to entice investors. Todd Gordon, managing director of Ascent Wealth Partners told CNBC:
“It’s the best in brand — its portfolio with social led by Facebook and Instagram. Their ad targeting is the best in the industry. We have some ad boycotts that are acting as an overhang, but we don’t diminish the long-term story — 33 times forward earnings on a 20% growth rate. We don’t feel it’s overvalued either”.
With technology redefining means of communication and the push to social media to dominate traditional media, Facebook has been tipped to see more future uptick in both its stock price and revenue. Boris Schlossberg, managing director of FX Strategy at BK Asset Management confirmed that Facebook-Google duopoly is a good bet for investors as both companies, “…have this rare combination of having mass audience and micro targeting, which is just absolutely unbeatable”.
How Much Damage Can a Lawsuit Cause to Facebook
As inevitable as lawsuits are in business, almost all firms try to avoid one. The action taken by the three giants including Facebook, Google, and Twitter to ban cryptocurrency-related advertisement back in 2018 has induced a class-action lawsuit filed by Sydney-based law firm JPB Liberty. The class-action lawsuit will seek about $600 million in damages that have been projected to likely grow up to $300 billion if more claimants join the action.
Businesses including Facebook have been impacted by the coronavirus pandemic which is still blazing hot in the United States, home to the three companies listed in the lawsuit. As much as the firm would wish for, the implication of the lawsuit can have a tremendous impact on shaking investor’s faith.
In all, Facebook will try to avoid the financial drain such lawsuits will cause especially when the $550 million settlement the company paid to resolve a lawsuit in January 2020 is brought into focus.