Facebook Inc Earnings Model (Rahul Nandakumar)
Author: Rahul Nandakumar, Published: July 29, 2020 7:11am, Category: Earnings Preview (Prior to the 2Q2019 earnings release)
Summary of Model: I have reason to believe that $FB will be reasonably bullish in the 2Q2020 earnings season due to its increased relevance in the wake of the Coronavirus pandemic. Like many other online tech companies since the global quarantine, Facebook has found a significant increase in its monthly active users and user time spent on the platform due to the restrictions of real-world interaction causing a spike in virtual interaction. While they face backlash from large companies – significant sources of advertising revenue – for their stance on political media, there is evidence to suggest that this won’t impact them heavily until at least the next quarter and the substantial increase in MAU would offset the losses incurred by the losses of partnerships. Moreover, in countries that have dealt with the COVID pandemic well, such as in Asia and Europe, and are beginning to open up, small businesses and global companies are more likely to spend money on Facebook to reach out to the growing number of Facebook users who have joined recently. Additionally, FB’s investments in different forms of virtual interaction will play into their benefit as virtual reality (Oculus) and instant messaging (Whatsapp, Messenger) will continue to increase in popularity in the United States as we continue to deal with our pandemic and FB has shown that they are willing to update to meet new demands with new updates to Instagram and the FB app that improve the ability to communicate during the pandemic.
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.