After slackening in April in the wake of the COVID-19 pandemic, things are looking up for online media companies, according to a BofA Securities analyst.
Data Points Underline Inflection: After being down 38% in April, the pace of decline in European digital display spending slowed to 25% in May and is expected to improve further to a 16% drop in June, analyst Justin Post said in a Wednesday note, citing IAB. (See his track record here.)
E-commerce growth accelerated in May, with the cost per thousand — a measure of online media pricing — continuing to trend up since bottoming in late March/early April, the analyst said.
Well-Positioned: Reflecting the improvement, online media companies remain poised to see revenue upside in the second quarter, Post said.
Social media companies are seeing strong downloads and engagements, suggesting the sector is well positioned for GDP recovery, he said.
Google's Search Revenue Correlated With GDP: As economies open up and travel spending increases, Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) is expected to see upside, as its search revenues are highly correlated with GDP growth, Post said.
"We are encouraged with recent YouTube engagement / monetization trends and continue to see an opportunity for GCP to grow its share among big-3 providers."
Facebook Has Potential to Capitalize On Usage Surge: Post is of the view that Facebook, Inc. (NASDAQ: FB) has the potential to capitalize on the surge in usage seen during shelter-in-place orders.
In the long term, the social media platform is poised to benefit from several under-monetized and under-value assets such as Messenger, Marketplaces and Watch, and material e-commerce growth opportunities, the analyst said.
Impressed With Pinterest: Pinterest Inc's (NYSE: PINS) recent engagement trends and the multiple product initiatives to drive increased ad spend on the platform are impressive, BofA said. The firm projects an acceleration in revenue growth as stores open.
Street Q2 Estimates For Snap Conservative: Snap Inc's (NYSE: SNAP) 20% year-over-year growth in first-quarter DAU marked the fourth straight quarter of accelerating DAUs, Post said. The increased Discover time spent suggested Snap's growth engine is not being derailed by TikTok, he said.
Twitter's Attractive Risk-Reward: Twitter Inc's (NYSE: TWTR) fifth straight quarter of accelerating user growth in the first quarter was the result of its ongoing product improvements and a robust news flow in 2020, Post said.
"We see an attractive risk / reward setup as sports and other live events return (NBA, Movies, Olympics) and see potential for 30%+ revenue growth with an improving ad product."
The Ratings: Post maintained a Buy rating on Alphabet shares and raised the price target from $1,420 to $1,610.
The analyst maintained a Buy rating on Facebook shares and increased the price target from $240 to $265.
The Neutral rating on Pinterest shares was maintained, while the price target was nudged up from $22 to $24.
BofA maintained a Buy rating on Snap shares and hiked the price target from $20 to $24.
The analyst has a Buy rating on Twitter shares, and he lifted the price target from $35 to $42.
The Price Action: At last check:
Alphabet shares were adding 0.99% to $1,466.44.
Facebook shares were slipping 0.28% to $238.
Pinterest was up 1.04% to $22.28.
Snap shares were rising 0.71% to $21.27.
Twitter was down 1.78% at $35.29.
Latest Ratings for GOOGL
|Apr 2020||SunTrust Robinson Humphrey||Maintains||Buy|
|Apr 2020||B of A Securities||Maintains||Buy|
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