Why Facebook Stocks Soar Despite Advertising Boycotts, Fines, and Government Investigations
In recent months, the social network Facebook has regularly been at the center of various scandals. Thus, the company faces $ 500 billion in fines for unauthorized face recognition, the US Congress continues its antitrust investigation, and large advertisers are boycotting the social network under pressure from human rights activists.
At the same time, the company’s shares do not think to fall in price at all. Why doesn’t even a large amount of not very positive news scare investors? Understanding our new material.
What’s happening with Facebook
In short, the pressure on Facebook comes in different directions. First of all, here it is worth noting the activity of the US authorities – for more than a year the Congress is investigating in relation to the largest companies. In addition to Facebook, Google, Amazon and Apple are suspected of non-competitive behavior and abuse of their market dominance
In addition, since mid-June 2020, about 400 brands, including Coca-Cola, Unilever and others, started a boycott ads on Facebook sites. This happened after calls by activists participating in protests against racism in the United States. According to them, Facebook does not pay enough attention to combating propaganda of violence and hatred. The meeting of activist leaders with Mark Zuckerberg did not lead to significant results.
Also in mid-August there was news that Facebook threatens up to $ 500 billion in fines due to the fact that the company’s Instagram photo service violated the rules for processing faces (the application even recognized people who turned off this setting). At the same time, the company has already agreed pay $ 650 million to plaintiffs in a similar case.
At first glance, there are not so few problems, however, the shares of the social network have been steadily growing over the past months.
Why stocks are not getting cheaper
Investors are not very scared by the news background. There are several reasons for this:
Facebook grows audience
Quarantine due to the coronavirus pandemic allowed the company to expand the audience of its services to 3.14 billion people. In addition to Facebook itself, the company owns Instagram, Messenger and WhatsApp.
In the last quarter alone, the number of unique daily social network users (DAU) grew to 1.79 billion (+ 12%,).
More advertisers despite boycott
Their number has exceeded 9 million. And while large companies are boycotting advertising on social networks, three-quarters of their income comes from representatives of small and medium-sized businesses.
Revenue is growing
According to reports, the social network’s revenue in three months increased by 11% and reached $ 18.7 billion – more than a billion dollars more than analysts’ forecasts.
Likewise, Facebook’s net profit grew 98% over the same period last year. The company earned $ 5.18 billion. Earnings per share were $ 1.8, while analysts had expected the figure at $ 1.4.
Prospects, and how to buy Facebook stock
Despite the end of a period of rapid growth due to the pandemic – quarantine measures in many countries are already seriously weakened and people are spending less time online – analysts assess Facebook’s prospects positively.
Among the possible growth drivers for the company is the direction of online stores. So, for example, the social network develops the services Facebook Shops and WhatsApp Business, which have many users from the e-commerce field.
In addition, the boycott of the company’s advertising platform and services is unlikely to last too long, since brands need access to the audience that uses Facebook.
In Russia, shares of Facebook and other American companies can be bought at St. Petersburg Stock Exchange… To do this, you do not need to open an account with a foreign broker, a Russian account will be enough. Open it can be online…
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