Facebook Inc Earnings Model (Shah)
Author: Ayush Shah, Published: July 28, 2020 8:21pm, Category: Earnings Preview (Prior to the 2Q2019 earnings release)
Summary of Model: Given the COVID-19 pandemic with most regions of the world under some type of lockdown order, the usage of social media services, particularly Facebook and their related services has skyrocketed. As a result, Facebook has seen dramatic growth in the last quarter. However, as restrictions begin easing and many regions begin regaining some sense of normalcy, I believe the utilization of Facebook’s social media platforms will decrease in the near-term. Therefore, I am bearish in the short-term. At the same time, with the expected second wave of COVID-19 in the latter part of 2020, I believe Facebook will realize increased utilization, and I am bullish for the long-term. This increase, coincides with the growth of Monthly Active Users, as well as the Average Revenue per User.
In addition, Facebook has made strides in the international markets, particularly the Asian Pacific region. With the recent Jio Partnership, along with other initiatives, I expect Facebook will see increased usage and growth from that region in comparison to other regions.
In addition, I also expect R&D expense to increase as Facebook begins expanding into other areas, namely VR. This expense goes hand and hand with the marketing expense, which I also expect to increase to better position the new products/platforms.
From a more macro perspective, the technology sector has generally performed well in light of the COVID-19 situation. As such, I expect this strength to propel Facebook to newer heights in the future, despite the recent controversies surrounding the company’s ads.
In addition, Facebook has made strides in the international markets, particularly the Asian Pacific region. With the recent Jio Partnership, along with other initiatives, I expect Facebook will see increased usage and growth from that region in comparison to other regions.
In addition, I also expect R&D expense to increase as Facebook begins expanding into other areas, namely VR. This expense goes hand and hand with the marketing expense, which I also expect to increase to better position the new products/platforms.
From a more macro perspective, the technology sector has generally performed well in light of the COVID-19 situation. As such, I expect this strength to propel Facebook to newer heights in the future, despite the recent controversies surrounding the company’s ads.
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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.