Worriers about Facebook (Facebook Stock Quote, Chart, News NASDAQ:FB) aren’t seeing the bigger picture, says portfolio manager Zach Curry, who argues that today’s COVID-19 stay-at-home lifestyle will only help the social media company down the road.
Facebook fell in trading on Tuesday as part of a wider market selloff where tech stocks like Microsoft, Apple and Google all ended up down over three per cent, a sign of more market volatility in the age of COVID-19.
And while it’s a given that social distancing will breed more interest in social media as a form of personal connection sans contact —and bring more eyeballs to Facebook’s array platforms— the flip side is that ad revenues are in the tank due to everyone’s business being shuttered for about a month now.
Facebook’s ad revenue is its bread and butter and thus investors will be anxious to see how things are faring for the company during the pandemic. There will be a partial reveal next week when the company presents its fiscal first quarter results on April 29, which will include financials up to March.
But Curry says the downturn will only be as long as shops are closed, meaning that Facebook should return to its revenue-generating ways once life returns to normal.
“Facebook was in pretty good shape before this crisis came through, and the biggest impediment I would say would be the advertising side of things. Businesses aren’t open so there’s really no point in them advertising, so advertising revenues go down for Facebook. So that is an area of concern in terms of their revenue going forward,” said Curry, president of Davis Rea, in conversation with BNN Bloomberg on Monday.
“That being said, I would think that people being forced to stay inside and spend a lot more time on Facebook and their associated platforms, their awareness is going to be pretty high and as soon as the economy opens up —and that looks like it’ll be taking place in the next month or two months— I would think that advertising revenue would come back slowly but surely to Facebook and things would move forward there,” he said.
“I don’t think you’re going to have a huge decline in interest just because you’re allowed outside of your house. I think that interest and the monthly average users and daily average users will continue,” Curry said.
As far as the COVID-19 crisis goes, Facebook has made a couple of notable moves, one being the announcement last week that the platform would start sending notifications to users who have interacted with posts that contain “harmful” misinformation about COVID-19. Users who like or share content, for example, which is likely to lead to “imminent physical harm” will now receive a message pointing them to a World Health Organization (WHO) webpage on COVID-19.
Meanwhile, this week in a Washington Post column, CEO Mark Zuckerberg said that data from social media platforms like Facebook can aid in the fight against the virus by providing better data to governments on potential outbreak hotspots and thus aid in getting resources directed efficiently.