Facebook Stock Forecast: FB Has A Tailwind From COVID-19 Pandemic

motek 1This Facebook stock forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • The mandatory stay-home quarantine act of many countries is a big boost to Facebook’s advertising business.
  • Offices and schools have been shuttered. Students, employees, and everybody else are now forced to stay at home. People will entertain themselves by spending more time on Facebook and Instagram.
  • The more people who spend longer times on Facebook-owned websites and apps, the better it is for Facebook’s $20.74 billion/quarter ad business.
  • One or two months of quarantines will no doubt boost Facebook’s H1 2020 ad revenue.
  • Stay-home quarantines also benefit Facebook’s Workplace service and Portal TV product.

Facebook (FB) is another collateral damage victim of the massive COVID-19 pandemic panic sell-off. Many investors lost their senses when they dumped FB shares way below its 52-week high of $224.40. It’s common sense that an advertising-focused firm like Facebook has no headwind from the COVID-19 pandemic. It is now a great opportunity to go long on FB while it trades below $170. My fearless forecast is that it will bounce back to above $200 before June.

The weekly chart below illustrates that the March Madness panic over the new coronavirus outbreak is temporary insanity. Most investors who dumped/shorted FB will again accumulate those shares once they realize that COVID-19 is actually a tailwind for Facebook.

(Source: Yahoo Finance)

My takeaway is that the first two quarters of 2020 will help Facebook beat its Q4 2019’s ad revenue of $20.736 billion. Do not believe the doomsayers. Pandemics have a little adverse effect on global advertising. Marketers and companies will actually increase their ad placements on Facebook’s web and mobile apps because there are now more people available to view them. People who are forced to stay home due to COVID-19 still have a lot of purchasing power. Attracting their interest through Facebook or Instagram ads while they have more time to spend on social apps is truly appropriate.

While it is true that physical stores are shuttered in many cities/municipalities today, online shopping is still going strong even in countries with total lockdown policies. In my country, the Philippines, online shopping portals Lazada and Shopee are now actually selling more products compared to prior months. The police and other government officials who are manning the quarantine checkpoints will always allow the easy transport of essential products (food, medicine, supplements, fuel, etc).

Facebook and its many apps are therefore the ideal ad platforms where big and small grocery/food companies can attract online orders. The stay-home situation of billions of people right now will also compel app developers/app managers to increase their ad spending on Facebook’s industry-leading app install advertising service.

The Economic Benefit To Facebook

Facebook benefits a lot from government-mandated quarantines over COVID-19 fears. There are now billions of workers, students, and citizens that are forced to stay at home. You should go long (or buy more FB shares) because Facebook’s total addressable market for targeted ads was enlarged thanks to COVID-19.

Read More: I Know First Facebook Stock Forecast Evaluation Report

I believe it is feasible for Facebook to report a Q1 2020 ad revenue of $21 or $22 billion. This is thanks to the stay-home global effect of the COVID-19 pandemic. Advertising accounts for almost 99% of Facebook’s revenue. It should convince investors that anything that boosts advertising sales of Facebook is a tailwind. Yes, a pandemic can be a tailwind. COVID-19 is disrupting the finances of many companies and countries. On the other hand, advertising giants like Facebook benefits from COVID-19.

(Source: Statista)

The Side Businesses of Facebook Also Get A Boost From COVID-19

The current pandemic also helps grow Facebook’s Workplace service and Portal TV products. The work-from-home initiative of many companies is not only benefiting Microsoft (MSFT) and Slack (WORK). Facebook’s competitive pricing for Workplace makes it a potent collaboration tool for employees forced to work from their residences.  Workplace’s Enterprise package only charges $8 per person per month. This is much lower than Slack’s $12.50 business account monthly fee.

(Source: Facebook)

Facebook had 3 million (up by 50% in just 6 months) paying customers for Workplace last October. I believe the COVID-19 pandemic is helping Workplace attain 5 million paying customers right now. The workplace is not a ticker mover for FB. However, it is still notable that Facebook found success as a collaboration software service provider. Facebook is a great long-term investment because it is not just for entertainment anymore. Facebook is a platform for office productivity and brainstorming!

The other big winner from COVID-19 quarantines is Portal TV. No other video messaging product can compete with Facebook Portal TV ability to let you use WhatsApp or Messenger on a 100-inch TV set. A Portal TV device on a large screen TV is just for workers to communicate/collaborate while they work from their own homes.

The Alexa Assistant integration also makes Portal TV products a great visual conversation/helper tool for many people. Stay-home quarantines will also encourage more people to spice up their online multiplayer games by using Portal TV to coordinate their strategies.

Conclusion

Facebook is currently undervalued because of the illogical panic over COVID-19. Buying FB shares is a no-brainer. This stock will trade above $200 and will probably post another 52-week high before 2020 ends. Look on the bright side, the contagious fear over COVID-19 made FB cheaper to own right now. Facebook’s stock is now valued below 21x Forward P/E GAAP.

Facebook Stock Forecast
(Source: Seeking Alpha)

Nobody can touch Facebook’s no.2 position in digital advertising. It will remain a highly-profitable company and will continue to post high double-digit annual revenue growth. Aside from more acquisitions of smaller companies, I am also sure that Facebook will eventually use some of its huge cash reserves (more than $54 billion) to pay dividends or on share buybacks.

My buy rating for FB is aligned with its very bullish one-year market forecast from I Know First. A stock only needs to receive a market forecast score of 100 to get a bullish call from I Know First. FB’s one-year trend score is higher than 300. In addition to that the most recent evaluation report indicates the hit ratio of the I Know First predictive algorithm for the Facebook stock forecast was extremely high – for 3-months’ horizon the hit ratio was 95%.

Facebook Stock Forecast

Past Success With Facebook Stock Forecast

I Know First has been bullish on Facebook stock price in a past forecast. On January 29, 2019, the I Know First algorithm issued a bullish forecast for FB stock. The algorithm successfully forecasted the movement of Facebook’s shares. One year after, Facebook’s shares have risen by 51.37% in line with the I Know First algorithm’s forecast. See the chart below.

Facebook Stock Forecast
FB-29-Jan-19-29-Jan-20

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