You can talk about your Amazons and Googles but for top tier return on investment, nothing beats Facebook (Facebook Stock Quote, Chart, News NASDAQ:FB), says Kim Bolton, president and portfolio manager at Blackswan Dexteritas, who claims there’s tons of upside from here for the name.
“Facebook surprised in their earnings a couple of weeks ago,” said Bolton, speaking on BNN Bloomberg on Wednesday. “Everyone expected to see ten per cent-plus year-over-year declines in their ad revenue, but they actually had a two per cent revenue beat there. And they gave decent guidance going forward.”
“They really are truly best of class on return of investment,” Bolton said.
Facebook’s share price has gained a lot of ground in recent weeks and is close to where it was at before the market pullback in February, hanging around the low $200.00 range.
The stock got a nice boost at the end of April with the release of the company’s first quarter results. Facebook hit $17.7 billion in revenue compared to $14.9 billion a year earlier and diluted EPS of $1.71 per share compared to $0.85 per share for Q1 2019.
Analysts had been calling for $17.41 billion in revenue and $1.71 per share. Facebook said ad revenue took a big hit for the month of March, due to the COVID-19-inspired economic shutdown, but added that the first few weeks of April were more stable.
“Our business has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook,” the company’s statement said. “We expect our business performance will be impacted by issues beyond our control, including the duration and efficacy of shelter in place orders, the effectiveness of economic stimuli around the world, and the fluctuations of currencies relative to the U.S. dollar.”
Bolton said Facebook’s future still has the question mark of whether or not US regulators will push ahead with antitrust charges against the company, a topic that has drifted to the background in recent months, with not only the global health crisis taking priority but also with one of Facebook’s biggest critics, Senator Elizabeth Warren, who has advocated for Facebook’s breakup, having lost the Democratic leadership bid to Joe Biden.
But from a market perspective, Bolton says the antitrust issue is still weighing on Facebook.
“So we see a near-term floor, right now it’s trading around $210. We think if you can get it under $200, it would be a gift,” Bolton said. “That’s based on very conservative metrics around it.”
“But we see the potential over the next couple of years of this [stock] getting up to about $300.
That’s if you can get this whole issue about the breakup done with,” he said. “They just get probably levied with a fine and then you can get back to that, you know, 25x multiple on their earnings per share.”
“And you can easily see this stretch up to $300.00 in the next couple of years,” Bolton said.