Jefferies Raises Price Targets on Alphabet (GOOGL) and Facebook (FB) as They Are Still Inexpensive Relative to Growth, Reiterates Snap (SNAP) as a Best Growth Idea
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The analyst argues that both stocks trade at “reasonable valuation multiples” while 2H estimates are likely conservative. A new price target for GOOGL is $3,325.00 per share from the prior $3,150.00, while the new FB price target is $440.00 from $425.00
“FB has outperformed the NASDAQ YTD, but valuation is compelling at just 23x FY22 EPS. 2H rev guidance appear conservative and note that FB has beaten street rev for the last 11 quarters. IG Reels and Shops ads only launched this year, but should be incremental upside drivers for '22 rev growth. For GOOGL, we view valuation at a premium to its 2YR avg. (15.8x FY22 EBITDA vs. 13x) as justified given the improved margin profile, breakthrough YouTube growth, and more aggressive share buybacks,” Thill said in a client note.
Other than these two internet giants, Thill also outlines Snap (NASDAQ: SNAP) as a good way to gain digital ad exposure and describes the stock as the “best growth idea” as new potential revenue streams are likely to drive upside to estimates
“In our view, Q3 rev ests are too low given they imply a 20% point decel on a 2YR stack from Q2 despite numerous drivers (e.g. resurging ad pricing, ad unit growth from reopening). While conservative guidance is warranted given the unknown impact of AAPL's privacy change, we believe the tailwinds will far outweigh the potential impact. Going forward, we are bullish on the likely monetization of high engagement areas like the Map, which we estimate could be a $2B+ rev opportunity by FY24 (20% upside to current ests). We see multiple years of 50%+ rev growth, which in our view supports the premium valuation.”
The analyst also raised the price target on Integral Ad Science (NASDAQ: IAS) to $28.00 per share from $23.00 and sees it as a “top small-cap pick with potential for sustainable 25%+ rev growth.”
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