This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Even after steady moves higher for the stock, markets still do not value FB’s fundamentals, while management continues to see strong execution, spelling upside potential
Market expectations for FB are currently very pessimistic. The market is expecting UAFRS (Uniform) ROA (ROA’) to fade from 61% in 2016 to 35% in 2021, with Uniform Asset growth slowing from 50%+ a year to 30% a year going forward. However, FB’s ROA’ has improved for the past three 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 appear too pessimistic, spelling potential for equity upside.