Facebook Inc Earnings Model (Albert Chen)
Author: Albert Chen, Published: July 19, 2020 10:11am, Category: Earnings Preview (Prior to the 2Q2019 earnings release)
Summary of Model: I am bullish on Facebook for the 2Q2020 earnings season due to several reasons. Facebook has undoubtedly experienced an increase in monthly active users since the COVID-19 pandemic hit worldwide. As businesses shut down and people are unable to work, the number of users on Facebook has shot up; people are much more likely to be at home on their computers in a quarantine setting than in normal times. At the same time, business owners are unlikely to pay Facebook for advertisements during quarantine because there's not much business activity going on anyway. And although there are boycotts and political obstacles currently hindering Facebook's revenue from advertisements (due to a lack of partnerships), I believe the dramatic increase in monthly active users offsets the decrease in advertisement partnerships. I'm also optimistic of Facebook's near future in the advertisement realm because in places like Asia where COVID-19 was combated with diligent social distancing guidelines and widespread use of masks in public spaces, many businesses are likely to re-open and pay Facebook money for advertisement exposure.
Disclosure of Potential Conflicts of Interest: The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.