RiverPark recently released its Large Growth Fund Q2’18 Investor Letter, discussing the fund’s second quarter performance as well as presenting its viewpoint on Facebook, Inc. (NASDAQ: FB) and other companies. In this article, we’re going to focus on the fund’s comments about Facebook, which is still a hot social networking stock all of the negative headlines.
Here is what RiverPark said about Facebook in the letter:
Facebook: FB shares rebounded from the 1Q18 data privacy scandal and were our top contributor for the quarter. The stock’s strength was driven by extremely strong 1Q18 results in which revenue increased 49% to $12 billion. Despite all of the negative headlines, monthly and daily average users each increased 13%, and average revenue per user increased 31%. Although the company substantially increased spending on innovation, internal reporting and new initiatives to bolster its data protection in response to recent events, the company still leveraged operating expenses, posting robust operating income growth of 64%.
Facebook’s business model remains among the most impressive in our portfolio with enormous global scale – over 1.4 billion people use Facebook every day – and extraordinary profitability – 84% gross margins, 46% adjusted operating margins and over $5 billion of free cash flow generated in just the first quarter. Future growth opportunities also abound as the company’s core business remains in a strong growth mode, while the company has significant nascent opportunities to monetize its Instagram, Messenger and WhatsApp platforms. While we do not anticipate that the recent media or regulatory scrutiny will have a long-term negative impact on the company’s growth, we will continue to monitor these issues. In the meantime, the relevance of the company’s platform to its users has continued to grow and, in our opinion, the FB management team has done a commendable job in both adapting to the heightened scrutiny and continuing to drive strong fundamental performance. At less than 20x forward earnings, we continue to find FB’s stock to be extremely attractive.
Facebook shares are down 2.18% since the beginning of this year. Over the past three months, the stock of the social networking giant has fallen 4.46%. Whereas the share price has moved up 6.11% over the past 12 months. FB has a consensus average target price of $205.96 and a consensus average recommendation of BUY, according to analysts polled by FactSet. On Monday, the stock was closed at $177.46.
Meanwhile, Facebook is a very popular stock among hedge funds tracked by Insider Monkey. As of the end of the second quarter of 2018, there were 193 funds in our database holding shares of the social networking company, including Immersion Capital, Taconic Capital, and Cat Rock Capital.