This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Facebook, Inc. (FB): Management’s confidence about monetizing Instagram, mobile, and their top-line and bottom-line guidance, and overly pessimistic market expectations spell equity upside potential
Market expectations for FB are currently very pessimistic. The market is expecting ROA’ to fade from 49% in 2016 to 25%, with Asset’ growth slowing from 50%+ a year to 30% a year going forward. However, FB has actually been seeing ROA’ improve the past three years, and they continue to have multiple levers to pull to drive strong growth and ROA’ expansion thanks to their multiple strong brands and their positioning in the digital advertising market. As such, market expectations appear too pessimistic, spelling potential for equity upside.