Social media giant Facebook (NASDAQ:FB) is scheduled to report earnings after the market closes on April 29. The company is showing some vulnerabilities headed into the quarterly report. It’s unknown at this time how the novel coronavirus pandemic will affect FB stock earnings.
However, Facebook continues to show strong profitability. There’s no indication that the recent dip portends anything more than a temporary setback.
Mark Zuckerberg’s company is still powerful, and FB stock is a huge opportunity for any investor.
Here’s a closer look at FB stock as it heads into its first-quarter earnings report.
FB Stock at a Glance
Facebook is the dominant social media company in the U.S., with a market capitalization of $508.1 billion. That dwarfs Twitter (NYSE:TWTR, $21.2 billion), Snap (NYSE:SNAP, $18.3 billion) and Pinterest (NYSE:PINS, $10.1 billion).
Facebook is one of the biggest five companies in the U.S., trailing only Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) in size.
Pretty impressive for a company that Zuckerberg created in his dorm room.
But for the year, FB stock has struggled. The stock is down about 12% year-to-date as Facebook struggles with a downturn in advertising due the coronavirus.
Facebook ad auction prices fell by 20% in February and March, The Wall Street Journal reported. Ad agencies also noted a steep decline in conversion rates, which measure what steps people take after clicking on an ad.
“Our business is being adversely affected like so many others around the world,” Facebook officials Alex Schultz and Jay Parikh wrote in a March blog post. “We’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of Covid-19.”
In the fourth quarter of 2019, FB reported revenue of $21.1 billion – representing 24.7% growth – and earnings per share of $2.56. Facebook had 90 million new monthly users and a 6.7% increase in net income.
Facebook earned $8.52 in average revenue per user, which beat forecasts of $8.38.
The Bullish Case For FB Stock
It’s completely understandable why advertising is taking a hit during the coronavirus pandemic – the global economy took a staggering blow; unemployment soared and people aren’t spending money the way they did six months ago.
But there’s good news for FB stock. While the advertising dried up, traffic on Facebook platforms is skyrocketing.
Schultz, Facebook’s vice president of analytics, and Parikh, the vice president of engineering, outlined the increase in their blog post. They say traffic on Facebook’s messaging services, including Messenger and WhatsApp, more than doubled in countries hit hardest by the virus.
“The usage growth from COVID-19 is unprecedented across the industry, and we are experiencing new records in usage almost every day,” they wrote.
That’s hugely important to know. Because as long as Facebook is drawing an audience, then the advertisers will come back as the coronavirus pandemic fades and the economy begins to get back to normal.
“The COVID-19-driven global quarantine is making FB the No. 1 place for everybody to connect for social, entertainment, business, and information needs,” Tigress Financial analyst Ivan Feinseth said.
Facebook also has a cash stockpile of nearly $55 billion, which gives it the staying power to weather a downturn as well as a resource to acquire another company at a discount to bolster its services.
The Bottom Line For FB Stock
Facebook has been on a great ride for a long time, with its stock price up 172% in the last five years before the coronavirus pullback.
With a growing, engaged audience, it’s only a matter of time before advertisers find their way back, and the stock price resumes its upward climb.
I have FB stock with a “B” rating in my Portfolio Grader.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
