Facebook, Alphabet and Pinterest share prices: Where next in 2021?

We look at Morgan Stanley’s 2021 price targets on number of key stocks in the online advertising space.

Like the vast majority of other equities, social media and advertising companies saw their share prices carved up during the March 2020 sell-off. Indeed, despite the likes of Facebook and Alphabet’s strong cash generative abilities and reserves, they still plunged alongside every other stock.

Facebook hit a 52-week low of $137.10, Alphabet (Google's parent company) plunged to $1,013 per share at one point, while Pinterest fell to just $10.10 per share.

The plunge in those names made a lot of sense at the time. Besides the general flight from risk assets, the likes of FB and GOOG were exposed to cost cutting (advertising budgets) from small and medium enterprises.

Facebook, in particular, also faced ad boycotts in July 2020 over its handling of hate speech. Less ads, less revenue.

Yet the doomsday predictions that many had for these companies never fully materialised. Both Facebook and Alphabet have traded strongly since those March lows; with Pinterest rising a staggering 646% from the lows recorded in March.

Looking at Facebook’s latest results further highlight this suggestion: during the third quarter of 2020, Facebook reported a 22% bump in total revenue, operating margins stood at 37% and net income came in at $7,846 million, up 29% on a year-over-year basis.

Looking ahead, at the time of that quarterly release, Facebook’s management said:

‘We expect our fourth quarter 2020 year-over-year ad revenue growth rate to be higher than our reported third quarter 2020 rate, driven by continued strong advertiser demand during the holiday season. Additionally, Oculus Quest 2 orders have been strong which should benefit Other Revenue.’

Facebook, Alphabet and Pinterest share prices: Morgan Stanley’s 2021 outlook

Overall, Morgan Stanley (MS) currently has Overweight (OW) ratings on Facebook, Alphabet and Pinterest and represent the investment bank’s favoured exposure to online advertising.

Looking at Facebook, the investment bank said:

‘We see 4%/11% upside to Street '21 revenue/EBITDA and our forecasts don't incorporate any specification contribution from Instagram Shops or Reels, both of which could add hundreds of millions of ad revenue in '21. We see a larger fundamental contribution or disclosure from FB.’

MS has a price target of $340.00 on FB.

On the topic of Alphabet, the investment bank is currently eyeing a $2,050 per share price target, a thesis built around ‘the travel recovery (12-15% of paid search) and strong YouTube trends from a improved direct response offering/more stable branded ad market.’

Finally, MS has a comparably bullish view on Pinterest, assigning the stock an Overweight rating and price target of $80.00 per share, while saying:

‘We see the combination of new products/tools and consumer behavior shifting toward social shopping driving revenue upside.’

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