Facebook Stock Price Forecast October 2021 – Time to Buy FB Stock?
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While Facebook (FB) stock is the second-best performing FAANG stock of 2021 with a year-to-date gain of 27%, the stock has come off its 2021 highs, falling over 10% during the last month.
Why has FB stock been falling and what’s the forecast for stock in October? Also, should you buy the dip in the stock?
Facebook stock recent developments
Facebook and controversies have tended to move hand in hand. The company faced lawsuits over its acquisition of WhatsApp and Instagram. It also paid almost a $5 billion fine over the Cambridge Analytica data scandal. Now, a new controversy has erupted about the impact Instagram has on teen mental health.
Facebook was contemplating a teen version of Instagram but has been forced to put these plans on hold over allegations on how Instagram is taking a toll on teen mental health. Frances Haugen, a whistleblower who joined Facebook in 2019, has revealed that the company prioritizes profits above everything else.
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“I’ve seen a bunch of social networks and it was substantially worse at Facebook than what I had seen before,” she said speaking with the New York Times. Haugen added, Facebook, over and over again, has shown it chooses profit over safety.”
In her cover letter, Haugen wrote that FB has publicized how it tried to combat misinformation related to the 2020 elections and the resultant violence. However, she said, “In reality, Facebook knew its algorithms and platforms promoted this type of harmful content, and it failed to deploy internally recommended or lasting countermeasures.”
FB stock price forecast
To be sure, while there are genuine concerns over social media taking an impact on mental health, Facebook’s strong moat in the space coupled with the network effect, make it an attractive social media stock to have.
Wall Street analysts are generally bullish on FB stock and 39 of the 51 analysts rate it as a buy or some equivalent while the remaining 12 have a hold rating. None of the analysts have a sell rating on the stock. Facebook has a median target price of $425 which is a 24% premium over current prices. Its street high target price of $500 is a premium of 45.9% over current prices.
Facebook stock target price
Last week, RBC initiated coverage on Facebook stock with an outperform rating and $425 target price. In September only, Jefferies boosted the stock’s target price from $425 to $440 while Goldman Sachs initiated a coverage with a buy rating and a $455 target price. Clearly, Wall Street analysts are not too perturbed by the concerns related to Instagram.
Earlier this year, Morgan Stanley had also issued a bullish note on FB stock. “We remain most positive on FB within the large cap social media names as we see their leading ROI, product innovation, and monetization call options (Reels, Marketplace, Shopping, etc) enabling them to navigate through difficult near-term engagement headwinds,” said Morgan Stanley analysts in their note.
Morgan Stanley is bullish on FB stock
While people are spending less time on social media as compared to the peak of the pandemic, the ad rates have improved from 2020 which would help companies offset the impact. According to Morgan Stanley “We also note that even a slight increase in News Feed ad load could offset any engagement decline. In our view, the extent to which FB can deliver on topline can lead to $16+ of free cash flow per share next year, painting a path toward our $440 bull case (~30% upside).”
Facebook stock long term forecast
The long-term outlook for FAANG names including Facebook looks positive. While the concerns over Instagram are legitimate, the fact is Facebook looks among the best stocks in social media industry. Analysts expect the company’s sales to rise 38.9% this year. While the sales growth is expected to come down to 19.2% next year, the growth outlook nonetheless looks impressive.
FB stock valuation
FB stock trades at an NTM (next-12 months) PE multiple of 23.8x which is way below the average multiple of 33.3x that it has traded since the listing. Notably, FB is the cheapest FAANG stock when compared to peers on the forward PE multiple. The current valuations look reasonable for an entry into FB stock.
Should I buy FB stock now?
FB stock is not looking too bullish on the charts after the fall last month. The stock has fallen below the 50-day SMA (simple moving average), which has been strong support. It also trades below the 100-day SMA as well as short-term SMAs like the 10-day, 20-day, and 30-day SMA. However, the stock is still above the 200-day SMA.
The MACD (moving average convergence) also gives a sell signal. The stock’s 14-day RSI (relative strength index) is 36.6. While it’s a neutral indicator, it is getting near the oversold zone as RSI values below 30 signal oversold positions.
That said, while Facebook stock could remain volatile in the short term amid the controversy over Instagram and the whistleblower expose, the recent weakness looks like a good buying opportunity, especially for long-term investors.
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