Where Does Facebook Go From Here?

Online advertising rebounds to benefit Facebook stock in the long run.

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

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Where Does Facebook Go From Here?

Online advertising rebound to benefit Facebook stock in the long run.

Background: At the height of the Black Lives Matter movement in the summer, Facebook had faced a lot of flak for not doing enough to control hate speech on its platform. As a result, several big companies such as HP, Coca-Cola, Clorox, Verizon, and Lego boycotted Facebook advertising altogether. Others such as Nike, Target, Microsoft, and Netflix greatly reduced their ad spend on the platform.

Notwithstanding such criticism and stern action from clients, Facebook easily beat Wall Street estimates in the most recent quarter. Revenue grew 22% and monthly active users grew 12%. The boycott, which has weakened considerably, is albeit on after five months. The reluctance of companies such as Clorox to return to the fold shows Facebook has work to do. Still, the small number of holdouts implies Facebook is operating from a position of strength.

What Happened?  Facebook has over 10M advertisers and its Q3 revenue growth is evidence of ad-spend resumption. The incessant shift of commerce from offline to online means ad-spend will continue to grow, given Facebook’s ever-growing empire. Add to this, Facebook Shops, Instagram Checkout, and Instagram Reels and the ad capabilities there, and the potential increases further.

The company expects Q4 ad revenue to be higher than that of Q3, given the holiday season. Despite election turmoil, senate hearings, and calls for content moderation, Facebook remains a go-to for advertisers to engage with a broad base of consumers.

Still, 2021 won’t be any easier. How Apple’s ad-tracking technology in iOS 14 will impact Facebook’s Audience Network is unknown. Campaigns such as “Stop Hate for Profit” will continue to demand transparency. Some big spenders still feel alienated. How the company leverages SMEs and their digital imperative in the post-pandemic world is the fuel that will drive Facebook’s revenue in the quarters to come.

Market Reaction: FB stock is up 35% YTD. It ended the day at $272.94, up 0.36%. JP Morgan raised Facebook’s target price from $315 to $330 in keeping with the overall outlook.

Company Snapshot 📈

FB $272.94 +0.97 (+0.36%)

Analyst Rating (48 Ratings) BUY 88%  HOLD 13%  SELL 0%

Newsworthy 📰

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  • Roll Out: Google is rolling out end-to-end encryption for RCS in Android Messages beta (GOOG +0.98%)

Later Today 🕒

  • Before Market Open: Autohome Inc Earnings (ATHM)
  • Before Market Open: Buckle Inc Earnings (BKE)

Fun Fact of The Day 🌞

The Statue of Liberty is made from 179,000 pounds of copper.

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