The price target implies a potential 31% jump from Monday’s intraday highs of $293.10.
Facebook has been under pressure of late after Apple said it planned on making changes to its iOS 14 that would enable users to block companies from tracking their activity in order to target them with ads.
Investors feared the changes might hurt Facebook’s advertising revenue, but a Clubhouse meeting with CEO and cofounder Mark Zuckerberg on March 18 helped to assuage those concerns.
“I’m confident that we’re going to be able to manage through that situation,” Zuckerberg said in the Thursday Clubhouse meeting.
Deutsche Bank analysts, led by Lloyd Walmsley, backed up Zuckerberg’s claim in their Sunday note to clients.
“We think investor focus is starting to shift away from fears around iOS changes towards a continued ad recovery and benefits from more eCommerce activity shifting into Facebook’s platform,” the analysts said.
The team added that they have received “positive feedback from the ad community” including “multiple encouraging data sets on ad prices and spending trends.”
Overall, Deutsche Bank said conversations with digital advertising agencies helped “confirm strong growth in spend on FB in January and February.”
Excluding foreign exchange dollars, the analysts see Facebook’s ad growth hitting 31% for the first quarter of 2021, up from previous estimates of 28.5%.
E-commerce was the other major bright spot in the Deutsche Bank report. Facebook added its “Shops” feature on all its major platforms last year in a push to compete in the lucrative e-commerce market.
Now, according to Deutsche Bank’s analysts, Facebook boasts 1 million active shops on its platform and 250 million people interact with those shops each month.
For reference, the e-commerce platform Shopify had 1.7 million global merchants at the end of 2020.
“Industry contacts in the digital ad industry have flagged a sharp uptick in interest in shops, including from national retailers, not just SMBs,” the analysts said in their note to clients.
Walmsley’s team added that it believes Facebook will increase share buybacks in 2021. Deutsche Bank expects the social media giants’ 2021 and 2022 GAAP EPS to hit $12.22 and $14.62, respectively, compared to a Bloomberg consensus of $11.36 and $13.77.
The DB team’s $385 price target for Facebook is based on a blended average of 25x GAAP price to earnings, 15.0x EBITDA, and a 4% FCF yield on 2022 estimates.
Facebook’s stock traded up 2.81% as of 2:54 pm ET on Monday.