Facebook (NASDAQ: FB) Second Quarter 2020 Profit – A strong performance driven by power in ad revenue
Facebook is a real money-generating machine and uses big data analytics to show targeted ads. However, from the ongoing boycott of ads to multiple antitrust investigations, the company seems to be stumbling from one crisis to another. Against this backdrop, Facebook is back in the spotlight today as it releases its second quarter 2020 earnings.
Facebook Q2 2020 profit score card
For the three months ended June 30, 2020, Facebook reported $ 18.69 in revenue, up 12.45 percent from the comparable quarter last year.
(All figures are in billions of dollars)
Facebook reported that Daily Active Users (DAUs) were up 12 percent year over year to $ 1.79 billion. Additionally, the monthly active users (MAUs) of the social media giant rose 12 percent year-on-year to 2.7 billion.
(All figures are in billions)
Finally, Facebook reported $ 1.80 in EPS, exceeding consensus expectations by $ 0.42.
(All figures are in dollars)
Given the significant uncertainties in predicting future growth, Facebook did not provide numerical sales guidelines, noting that:
“We expect our third quarter 2020 ad revenue growth rate for the third quarter of 2020 to be roughly comparable to this July performance. There are several factors contributing to this outlook, including:
First, persistent macroeconomic uncertainty, including the pace of recovery and the prospects for additional economic stimulus;
Second, our expectation that part of the recent wave of community engagement will normalize as regions reopen;
Third, the impact of some advertisers interrupting their spending on our platforms relates to the current boycott, which is reflected in our July trends; and
Finally, the headwinds related to ad targeting and measurement, including the impact of regulations, such as the California Consumer Privacy Act, and the headwinds of expected changes in mobile operating platforms, which we expect to continue throughout the year will become more important. “
Regarding active users, the social media giant stated:
“We expect the number of Facebook DAUs and MAUs in most regions to decline flatly or slightly in the third quarter of 2020 compared to the second quarter of 2020.”
The stock has responded positively to Facebook’s Q2 2020 earnings, recording a 6 percent gain in after-hours trading. To date, inventory has increased by more than 11 percent.
As mentioned earlier, a significant number of advertisers avoid Facebook because of the content moderation policy. This boycott campaign is motivated by concerns about the supposedly lax way in which the social media giant is tackling misinformation and hate speech. The move was initiated by the advocacy group ‘Stop Hate for Profit’ and has received support from major companies such as Starbucks (NASDAQ: SBUX), Microsoft (NASDAQ: MSFT), Proctor & Gamble (NYSE: PG), Honda America, Levi Strauss (NYSE: LEVI), Patagonia, etc.
However, it should be noted that a large majority of these advertisers simply interrupted their ad on Facebook for a period of 1 month, leading many to conclude that the cumulative effect of this campaign on Facebook’s finances would be only transient. Nonetheless, the tech titan seems to respond to the changing winds. According to an Bloomberg reportCan Facebook ban all political ads leading up to the November US presidential election.
Despite the increasing number of challenges to Facebook’s dominance, a number of analysts remain optimistic about its prospects. To illustrate, Jeffries raised the target for the social media giant’s stock price to be $ 285 from $ 250 on July 13 as a result of healthier than expected ad spend for May and June. The imminent launch of Instagram’s Roles function in the US, UK and 50 other countries only adds to overall optimism. In addition, this feature allows users to record 15-second videos with music and audio clips and aims to compete with the wildly popular TikTok app.