Wall Street firms cut price targets for Facebook, but they're still bullish on the stock. Here's why

Published Tue, Oct 26 20217:25 AM EDTUpdated Tue, Oct 26 20219:40 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

A weak third quarter on several fronts for Facebook may have cooled near-term expectations, but Wall Street analysts are sticking by the stock. Facebook on Monday beat estimates for third-quarter earnings per share, but it missed on revenue and a few user metrics. Shares moved higher Tuesday in premarket trading, likely in part because expectations were lowered by Snap's weak report earlier this month. That release raised concerns about the digital advertising market. That weakness was apparent in Facebook's earnings report and was a key part in several price target cuts from major Wall Street analysts. However, those targets still show double-digit upside for the stock, and the analysts stuck with buy or buy-equivalent ratings. Here are the notable price target cuts for Facebook. The stock closed at roughly $329 per share Monday before the earnings report. Morgan Stanley: $365 per share from $400 per share JPMorgan: $390 per share from $450 per share Goldman Sachs: $445 per share from $455 per share The changes to the ad market from Apple's new privacy policies and economic disruption were a key story for this Facebook quarter, but analysts said those issues won't be enough to change the long-term bull cases. "We think much of this is transitory and we see multiple reasons why FB's continued (and still-accelerating) investment will enable them to maintain high teens to 20's [year-over-year] ad revenue growth and remain destination 1 or 2 (along with [Google]) for incremental online ad spend," Morgan Stanley's Brian Nowak said in a note. The company also announced it would begin breaking out a new business unit to show its development of longer-term projects, including the "metaverse." Goldman Sachs analyst Eric Sheridan said the change should be a positive for Facebook. "With the coming breakout of Facebook Reality Labs (which management estimates will be $10b of operating loss in 2021), we see FB shares beginning to take on a sum-of-the-parts approach akin to transitions Alphabet and Amazon have undergone in prior years & as a driver of share outperformance," the Goldman note said. Similarly, Bank of America analyst Justin Post cited the new business division as a reason to hike his price target on the stock to $400 per share from $385 per share, even as he lowered his earnings per share estimates for 2022. —CNBC's Michael Bloom contributed to this report.

A Facebook logo is displayed on a smartphone in this illustration taken January 6, 2020.

Dado Ruvic | Reuters

A weak third quarter on several fronts for Facebook may have cooled near-term expectations, but Wall Street analysts are sticking by the stock.