This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis.
The market is overly spooked by headline risk, while management continues to see strong execution, spelling upside potential
Market expectations for FB are currently very pessimistic. The market is expecting UAFRS-based (Uniform) ROA (ROA’) to fade from 65% in 2017 to 15% in 2022, with Uniform Asset growth slowing from 50%+ a year to 30% a year going forward. However, FB’s ROA’ has improved for the past five years, and management continue to have multiple levers to pull to drive strong growth and ROA’ expansion, thanks to their strong brands and their positioning in the digital advertising market. As such, market expectations, which appear to solely be focused on regulatory downside, appear too pessimistic, spelling potential for equity upside.