Facebook FB and its various social media and globally popular digital switching platforms may seem tailor-made to succeed during the coronavirus economy that has brought an end to a ton of business activity. And FB stocks largely followed the movement of the S&P 500 in 2020, unlike other tech giants Apple AAPL and Microsoft MSFT.
The question now is how much Facebook, which derives almost all of its money from advertisements, will suffer from the fact that more companies are temporarily closing or reducing their advertising expenses?
Facebook’s business model is simple
Almost 99% of Facebook’s revenue in 2019 came from advertising in its various offer families, which today include its namesake social media platform, Instagram, WhatsApp and Messenger. The company exceeded our fourth quarter fiscal 2019 revenue and revenue estimates in late January, with fourth quarter sales up 25% and full year revenues up 27% to 70.70 billion. dollars.
Facebook has been able to grow, despite all of its setbacks – which include a historic fine of $ 5 billion FTC, due to its ability to reach billions of people as traditional print advertising and television ad spending declines. In fact, digital advertising is expected to grow from 46% of the total global advertising market in 2018 to 60.5% by 2023, according to eMarketer.
In the era of subscription models like Netflix NFLX, Disney + DIS and many others, Facebook will likely remain crucial. Daily active Facebook users increased 9% in the fourth quarter to 1.66 billion, with UAMs increasing 8% to 2.50 billion. Meanwhile, Mark Zuckerberg’s firm noted that its figure for “monthly active family workers” had jumped 9% to 2.89 billion as of December 31, 2019.
Facebook is working to expand its business model. These efforts include an e-commerce push, via its eBay-style eBay challenger Facebook Marketplace. FB has also strengthened its streaming and live video unit as it delves deeper into augmented reality and more.
Coronavirus growth prospects
The nearby chart lets investors see how much Facebook sales have continued to grow. But of course, its days of crazy 50% year-over-year growth are probably gone for good, and we’ve seen a fairly significant slowdown in recent years.
FB’s sales for fiscal 2017 jumped 47%, after increasing 54% in 2016. Then, its revenues for fiscal 2018 exceeded 37%. We have already mentioned that its 2019 sales increased by 27%, which seems much worse by these high comparisons. And Facebook’s revenue growth for 2020 appears to be shockingly weak compared to these historic growth standards.
Cowen & Co. analysts estimated last month that Facebook and Google GOOGL together could see more than $ 44 billion in worldwide advertising revenue wiped out in 2020. The rationale is pretty simple: everything from small business spending to Big budget movie ads, has slowly died out as the coronavirus blocks much of the global economy.
With that in mind, our current estimates from Zacks predict that Facebook’s revenue for fiscal year 2020 will only increase 10.9% to $ 78.43 billion. This sounds rough in comparison and is down sharply from our estimate before the release of the fourth quarter that Facebook’s forecast sales for fiscal year 2020 would increase by almost 22%.
Ultimately, FB’s adjusted earnings for fiscal 2020 are expected to further jump 18.5% to $ 7.62 per share. Despite the expected growth, we can see that the EPS estimate for Facebook for fiscal year 2010 has dropped by about 18% in the past 60 days, from $ 9.28 to its current estimate.
People around the world are using Facebook platforms more than ever to communicate and connect when stuck inside. But the company’s advertising-based model is expected to be a resounding success during the coronavirus.
Facebook is currently a Zacks Rank # 3 (Hold) that has underperformed AAPL, MSFT and many other tech powers over the past year. The FB stock is down about 14% in 2020 and is still 21% below its 52-week high despite its recent jump. As a result, the stock could continue to function if the market is able to continue its recent ascent.
Facebook has just announced that it should publish its financial results for the first quarter of fiscal 2020 after the market closes on Wednesday April 29.
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