By Christiana Sciaudone
Investing.com -- Facebook (NASDAQ:FB) was named a top pick among large cap social media stocks by Morgan Stanley (NYSE:MS).
Shares nonetheless dropped more than 1%.
The company's investments and monetization efforts offset any near-term engagement drop-offs as the pandemic nears an end, the firm said, according to CNBC.
“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,” the firm said.
Morgan Stanley also sees Facebook driving ad growth, helping the social media giant navigate through near-term engagement headwinds.
“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),” the analysts said.
Less time on social media as a result of Covid-19 restrictions being lifted means innovation and ad pricing become more important, Morgan Stanley said. That will help drive ad growth and allow the company to beat estimates in the second half of this year and next.
“It will be increasingly important for social platforms to continue to develop products (social shopping, short-form video, maps, etc) that drive engagement and deliver measurable ad ROI directly linking ad dollars to transactions,” the analysts said.