Facebook (Facebook Stock Quote, Chart, News NASDAQ:FB) may have its detractors but when it comes to being well-positioned to benefit from what’s happening in the world today and where we’re headed tomorrow, you gotta like it, says portfolio manager Paul Harris of Harris Douglas Asset Management.
Harris spoke to BNN Bloomberg on Monday and argued that while FB’s bread and butter business, namely, digital advertising, has been rocked by the COVID-19 crisis, there’s light at the end of the tunnel for the social media giant.
“We own Facebook,” Harris said. “A lot of their revenue comes from advertising and you saw in the last quarter that they think the next quarter may be a little bit more difficult but they’ve seen sort of a flattening out of the decrease in advertising.”
“What we feel is that if advertising is going to come back strongly it’s probably going to do it through the digital format,” Harris said. “We also feel that things like Instagram and WhatsApp and those kinds of products have really not been monetized well by Facebook and we’ll see the kind of monetization off that over the next little while.”
Facebook delivered quarterly earnings at the end of April posting Q1 revenue up to $17.7 billion versus $14.9 billion a year earlier and diluted EPS of $1.71 per share versus $0.85 per share last year. And while both numbers beat analysts’ estimates for the quarter, Facebook management pointed out that March’s ad revenue fell significantly due to the economic pullback related to the pandemic.
“We know that advertising tends to be very sensitive to the macroeconomic climate. We really have a very cautious outlook on how things are going to develop,” said CFO David Wehner to CNBC after the quarterly release. “We’re not immune from this crisis.”
Facebook has been dealing with COVID-19 fallout of another sort as it tries to curb the dissemination of misinformation related to the coronavirus while maintaining its stance against censorship on its platform. The company announced in April that it would begin warning users if they interacted (through likes or comments, for example) with posts related to COVID-19 that were considered harmful.
But the battle over Facebook will have many more chapters written in upcoming years, as legislators in the United States continue to debate whether Facebook, along with other social media and Big Data companies like Google, have become too powerful and should be broken up through appeal to anti-trust legislation.
On that front, Harris said that in the end there’s likely to be less damage to Facebook than is often assumed.
“I know that people are worried about the fact that there may be a lot of department of justice issues that they face, but I think they’ve shown that these are needed technologies, and Facebook has been trying slowly but surely to move in the right direction when it comes to how they use data and how they maintain data,” Harris said.
“I think one of the issues that we have to face is the fact that as we go through this process, we may have to give up [some of] our liberties, our civil liberties, to actually have a great, normal life,” he said.
“So I think that’s the bigger issue and these kind of technologies will help you do that. So, we like Facebook, and we own it here,” Harris said.