Morgan Stanley says Fb is a high inventory choose

Facebook boss Mark Zuckerberg

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Morgan Stanley analysts said in a release Friday that Facebook remains the top pick among social media stocks with large caps as its investment and monetization efforts offset any short-term drops in engagement as the coronavirus pandemic wears off nearing the end.

“We remain FB the most positive within the major social media names as we see their leading ROI, product innovation and monetization options (reels, marketplace, shopping, etc.) that allow them to navigate difficult short term engagement headwinds . ”Said the company.

Morgan Stanley also sees Facebook driving ad growth and helping the social media giant with a potential drop in engagement.

“We also find that even a slight increase in ad load on the News Feed could offset any decrease in engagement. In our view, the extent to which FB Topline can deliver could result in more than $ 16 per share in free cash flow over the next year, pointing the way “toward our bull fall of $ 440 (~ 30% uptrend)” said the analysts.

With restrictions on the Covid-19 pandemic lifted, people are likely to spend less time on social media. The company said that reduced social media usage and engagement leads to increased importance of innovation and ad pricing / ROI. This will help drive ad growth and allow the company to beat estimates in the second half of this year and next.

“It’s becoming increasingly important for social platforms to continue developing products (social shopping, short videos, cards, etc.) that drive engagement and deliver measurable ad ROI that links advertising money directly to transactions,” said the analysts. It’s not a new dynamic, but it’s increasingly important to meet or exceed estimates, they added.

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