Facebook Drops 6% on ‘Uncertain’ 2021 Warning; J.P. Morgan Raises PT

Facebook shares fell 6.3% on Friday after the social media giant said that “looking ahead to 2021, we continue to face a significant amount of uncertainty.” At the same time, the company posted 3Q revenues of $21.5 billion jumping 22% year-over-year and coming ahead of analysts’ estimates of $19.8 billion. Facebook earned $2.71 per share during the quarter, surpassing the Street consensus of $1.91. EPS grew 28% from the year-ago quarter.

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Facebook’s (FB) daily active users (DAUs) rose 12% year-over-year to 1.82 billion, beating analysts’ estimates of 1.79 billion users. Monthly active users (MAUs) also increased by 12% year-over-year to 2.74 billion. The average revenue per user of $7.89 exceeded the consensus estimate of $7.32.

The company’s CFO David Wehner said that DAUs and MAUs declined slightly in 3Q in the U.S. & Canada from 2Q levels. He continues to expect the trend to continue and said that in 4Q, “the number of DAUs and MAUs in the US & Canada will be flat or slightly down compared to the third quarter of 2020.” However, Facebook anticipates 4Q ad revenue growth on a year-over-year basis to be higher than in 3Q, driven by “continued strong advertiser demand during the holiday season.”

Citing uncertainty, Facebook said that 2021 could witness a possible reversal in online commerce trend, which could dent its ad revenue growth. “Considering that online commerce is our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth,” Wehner warned.

In addition, Wehner cautioned “significant targeting and measurement headwinds in 2021” and expects “headwinds from platform changes, notably on Apple iOS 14, as well as those from the evolving regulatory landscape.” (See FB stock analysis on TipRanks).

Following the results,, J.P. Morgan analyst Doug Anmuth on Oct. 30 raised the stock’s price target to $330 (25.4% upside potential) from $315 and maintained a Buy rating. The analyst said that the company’s 3Q report was “incrementally positive” on “sharp” ad recovery. He expects further acceleration in ad revenues in 4Q.

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 34 Buys, 2 Holds and 1 Sell. The average price target of $318.43 implies upside potential of about 21% to current levels. Shares are up by 28.2% year-to-date.