Facebook smashes analyst expectations for Q2/2020
In one of our last analytical articles on Facebook, we pointed out how an advertising boycott campaign from big companies like Verizon, Unilever, Starbucks, Coca-Cola, Honda, and spirits giant Diageo could result in a bearish acceleration in the stock from Facebook.
But last week, earnings for Q2/2020 were reported, and it seems as if the boycott campaign is a toothless tiger, as Facebook smashed expectations from Wall Street analysts and could be headed for a continued bull run.
11% revenue growth amid Corona slowdown and bad news coverage
While Facebook reported its slowest revenue growth since its 2012's initial public offering, analyst expectations with 17.31 billion USD were topped with Facebook reporting 18.69 billion USD in revenue.
Monthly active users were also up, with Facebook claiming 3.14 billion monthly users across its offered platforms, up from 2.99 billion monthly users in the previous quarter.
And with Earnings per Share (EPS) reported at $1.80 against an expected $1.39, it didn't come as a big surprise to see Facebook shares rise more than 6% already in extended trading hours.
Facebook CFO Wehner said the company expects its daily and monthly users to be slightly down in regions around the world where Corona restrictions are eased, but still, the company forecasts revenue growth for Q3/2020 to be around 10%, with taking into account headwinds like economic volatility, the ad boycott, and regulations around ad targeting.
In our opinion, it remains to be seen whether or not such strong revenue growth numbers are achievable, especially in regards to advertising.
Given the fact that current developments in the global economy, recession fears, and the negative impact on the revenue outlook for many companies for the months and probably years to come. Currently, due to the advertising situation on Facebook, this could result in broader marketing cost-cutting.
In addition to this, we'd also like to emphasize the long-term aspect again: if Facebook does not find a solution in regards to the moderation of hate and disinformation which leaves advertisers feeling like they have sponsored violent, bigoted content, or lies, the companies now boycotting and/or cutting their marketing expenses because of the Coronavirus pandemic could probably never return in the future.
How to trade Facebook Inc. CFD/#FB in this environment?
When looking at a daily chart, the overall picture stays bullish, even though with a neutral touch between 220.00 USD and 250.00 USD.
The recent break and push below 220.00 USD at the end of June can certainly be considered the first crack in the foundation.
In addition to this, the potential bearish divergence in the RSI(14) continues to point to diminishing bullish momentum.
While the overall mode in #FB stays bullish above the SMA(200), a break below 208.50 USD and below the SMA(200) would be clearly bearish and a drop below 200.00 USD would be very likely.
In fact, we consider the psychological mark around 200.00 USD only a stop-over could imagine a mid-term target in the second half of 2020 to be found around the current 2020 yearly lows around 140 USD.
On the other hand: given the recent run in US tech, the strong earnings not only from Facebook, but also from Apple or Amazon, further bullishness and a push to new all-time highs in Facebook shouldn't be ruled out.
That said, any anticipation of a break below 208.50 USD should include a stop above the current all-time high of around 255 USD, indicating that the stock is not yet ready for a deeper correction and sharper move down:
Source: Admiral Markets MT5 with MT5SE Add-on #FB chart (between May 8, 2019, to August 6, 2020). Accessed: August 6, 2020, at 07:20pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of #FB increased by 34.15%, in 2016, it increased by 9.93%, in 2017, it increased by 53.38%, in 2018, it dropped by 25.71%, in 2019, it increased by 56.57%, meaning that after five years, it was up by 160.1%.
Discover the world's #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.