Facebook (FB) is fresh off a strong earnings report, which underscores its massive moat in the social media space. Facebook has faced several public relations challenges over the past couple of years (i.e., Cambridge Analytica, coordinated boycotts, government inquiries into privacy, jumbled earnings calls, and anti-competitive testimonies). Exacerbating these public relation issues has been the COVID-19 backdrop, both domestically and abroad. As companies scale back advertising spending amid the COVID-19 pandemic, Facebook continues to grow across all business segments, with its user base continuing to expand slowly. Facebook’s moat is undeniable, and any meaningful sell-off could provide an entry point for the long-term investor.
Recent Advertising Boycotts
Facebook faced a very public onslaught of companies joining an advertising boycott across its social media platforms. However, its latest earnings suggest that this effort may have been largely symbolic and virtually inconsequential to its revenue and growth numbers. The advertising boycott had grown to roughly a thousand groups and multinational companies. This presented a unique challenge that still has the potential to weigh heavier on the company since this boycott will directly impact revenue as overall compliance/security expenses swell. The magnitude of this boycott may inevitably influence the stock price if this movement expands in sheer numbers and duration. However, as advertising spending is abandoned indefinitely until further notice due to this boycott and overall spend slows due to COVID-19, this culmination could cast uncertainty around its stock valuation. Continue reading "Facebook's Moat Undeniable"