Facebook is a dominant social media player, with 2.5 billion people around the world using one or more of its apps (Facebook, Instagram, Messenger, WhatsApp) every day, over 200 million businesses utilizing its free tools and more than 10 million active advertisers across its services. The pandemic continued to add more users to the company’s platform as people looked for means to be entertained and stay connected.
Amid the lockdowns, Facebook’s advertising revenue was under pressure as macro uncertainty impacted several businesses. Also, major advertisers decided to boycott the company in July as they wanted the social media giant to take more stringent measures to halt the spread of hate speech and misinformation on its platform.
However, the boycott didn’t seem to have much impact and in fact, ad revenue picked up in 3Q, growing 22% year-over-year to $21.2 billion. Overall, Facebook’s 3Q revenue rose 22% to $21.5 billion and EPS increased about 28% to $2.71.
Also, Facebook had 2.74 billion Monthly Active Users (or MAUs) as of Sept. 30, reflecting a 12% year-over-year growth. If we include all other apps, the company had 3.21 billion Family Monthly Active People (or MAP) as of September end, implying a 14% rise. Another key metric, Average Revenue Per User or ARPU, was up 9% to $7.89.
However, investors were spooked as Facebook’s user base in the U.S. and Canada fell to 196 million daily active users in 3Q from 198 million in 2Q. The company said that its U.S. and Canada user base was elevated in 2Q due to the impact of the pandemic and cautioned that it expects its user base in these regions to remain flat or decrease in 4Q.
It also cautioned investors about certain headwinds in 2021, including the impact of a potential change in the accelerated e-commerce trend experienced during the pandemic on ad revenue, a change to Apple’s ad tracking technology in iOS 14 and “evolving regulatory landscape.”
Meanwhile, Facebook expects its 4Q ad revenue growth rate to be higher than 3Q due to advertiser demand in the holiday season. It is also optimistic about ‘Other Revenue’ growth thanks to the demand for Oculus Quest 2. Facebook is trying to grow its revenue base beyond advertising through products like Portal (a video communication device with Alexa built into it) and Oculus (a virtual reality headset). Facebook is teaming up with Luxottica, the maker of Ray-Ban and Oakley, to build its first smart glasses, which it expects to launch next year.
One of the key concerns about Facebook is the antitrust scrutiny. The U.S. Federal Trade Commission is expected to file a lawsuit against the company for using its market power in social networking to maintain a monopoly.
On Nov. 16, J.P. Morgan analyst Doug Anmuth reiterated a Buy rating on Facebook and increased the price target to $330 from $315 noting that the company stands to benefit from the rebound in online advertising. The analyst feels that despite the COVID-19 situation, the online advertising market appears on pace for continued acceleration through 4Q.
Facebook continues to confront election rated censorship controversies. However, it remains a staple in technology and a blue-chip stock with enticing upside.
Our AI systems rated Facebook C in Technicals, B in Growth, B in Low Volatility Momentum, and B in Quality Value. The stock closed down 6.31% to $263.11 on volume of 47,299,002 vs its 10-day price average of $274.26 and its 22-day price average of $269.78, and is up 25.42% for the year.
Revenue grew by 11.71% in the last fiscal year and grew by 94.27% over the last three fiscal years, Operating Income grew by 19.88% in the last fiscal year and grew by 42.33% over the last three fiscal years, EPS grew by 36.52% in the last fiscal year and grew by 62.85% over the last three fiscal years.
Revenue was $70697.0M in the last fiscal year compared to $40653.0M three years ago, Operating Income was $23986.0M in the last fiscal year compared to $20203.0M three years ago, EPS was $6.43 in the last fiscal year compared to $5.39 three years ago, and ROE was 19.96% in the last year compared to 23.86% three years ago.
Forward 12M Revenue is expected to grow by 16.71% over the next 12 months, and the stock is trading with a Forward 12M P/E of 26.3.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 290.19.
The projected lower bound is: 246.77.
The projected closing price is: 268.48.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 24.2930. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 46.03. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 56 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -108.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 10 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 7 period(s) ago.
Rex Takasugi – TD Profile
FACEBOOK INC A closed down -1.270 at 268.430. Volume was 100% below average (consolidating) and Bollinger Bands were 15% narrower than normal.
Open High Low Close Volume 270.890 270.947 264.530 268.430 3,030
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 273.79 268.68 231.70 Volatility: 21 51 60 Volume: 13,859,164 20,307,530 24,056,396
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FACEBOOK INC A is currently 15.9% above its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods.
Our volume indicators reflect volume flowing into and out of FB.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on FB.O and have had this outlook for the last 3 periods.