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Commentary

Neither Users Nor Investors Should Be Suffering From Facebook Fatigue

We’re raising our fair value estimate for Facebook after a strong quarter, but investors should wait for a more attractive price before investing.

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 Facebook (FB) continued to exploit its position as the highest-trafficked mobile application while benefiting from the shift in advertiser demand from offline to digital during the second quarter. We will make some minor adjustments to our financial model and increase our fair value estimate to $85, but we would not recommend the shares unless they were to trade below our fair value estimate. We are sticking with our wide moat rating.

User growth metrics continue to show resilience, as overall monthly users grew 13% versus the prior year to 1.49 billion, while daily users grew to 17% to 968 million. Mobile daily users grew even faster, posting a 29% rate and reaching 844 million users. In our view, Facebook's network effects and value proposition continue to support the largest global social network. During the quarter, users spent more than 46 minutes per day on three of Facebook's main applications: Facebook, Messenger, and Instagram.

Rick Summer does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.