In Focus: Facebook to $300
Facebook will trade at $300 per share, and investors would be wise to buy the current bad news surrounding the company.
Facebook has been the cause of national outrage in the past, which caused the stock price to drop. But eventually, the stock bounced back and investors made lots of money.
Facebook is currently dealing with a new crisis, major companies suspending their advertising spend due to how Facebook handles hate speech on the platform.
A coalition which includes the NAACP and the Anti-Defamation League started the #StopHateForProfit campaign, and the campaign calls on companies to stop advertising with Facebook until the company makes changes to how it handles hate speech on its platform.
Several large corporations have heard the call and have publicly announced that they will halt advertising spending on Facebook. Ben & Jerrys, Coca-Cola, Hershey's, Honda, Verizon, JanSport, North Face, and Levi Strauss are just a few of the larger companies that have decided to pull their Facebook ad spend.
“It is clear that Facebook and its CEO, Mark Zuckerberg, are no longer simply negligent, but in fact, complacent in the spread of misinformation, despite the irreversible damage to our democracy,” Derrick Johnson, president and CEO of the NAACP said in a statement last week.
Facebook's stock price rose earlier in the week despite some small companies announcing their ad pull, but as the larger companies like Ben & Jerry's, Verizon, Procter & Gamble and Coca-Cola joined the list, Facebook investors began to feel the pressure. Facebook's stock closed last week at $216.08, down $19.60 on Friday, an 8.32% drop on the day.
Pre #StopHateForProfit, Facebook was already dealing with a slow down in ad spending due to the COVID-19 pandemic. According to Influencer Marketing Hub, 69% of brands they surveyed planned to decrease advertising spending in 2020. This could be the reason why Facebook has been so lenient on political hate speech.
While companies can scale down advertising in 2020, politicians cannot. By flagging or banning political advertisements Facebook could see less political ad spending on the platform. In a Forbes article from 2019, specialists in advertising and political campaigns estimated that $6 billion to $10 billion could be spent on political ads in 2020, with 21% being spent on digital media.
On Friday Mark Zuckerberg addressed the public with updates coming to Facebook. The company plans to ban posts about immigration officials checking for papers at voting stations. Also, the platform will get more aggressive on voter suppression based on race and ethnicity. These changes come in the context of the upcoming 2020 election, said Zuckerberg.
Some people didn't see the announced changes as enough. Rashad Robinson, president of Color of Change, one the groups behind the boycott called Zuckerberg's address, "11 minutes of wasted opportunity to commit to change."
Even before Friday's announcement by Zuckerberg, Facebook reached out to companies behind the scenes to advise them of their efforts to battle socially insensitive material on the platform.
But not all people see this as the end for Facebook. Colin Sebastian of Baird stated "... at this point we don't expect much of an impact on Facebook revenues. Keep in mind the company's bread and butter is small and medium sized businesses" when asked by CNBC about the current situation facing Facebook.
Sebastian pointed out in his interview that we've seen this story from Facebook before, where companies pulled advertising or threatened to pull advertising after the Cambridge Analytica scandal. Yet, just a few years after Cambridge Analytica Facebook's stock is trading at all time highs.
Advertisers want to stay away, but they can't. Facebook is TV 2.0 for companies looking to advertise. It has the wide appeal of television and the data to help a company really hone in and target their market.
Through the #DeleteFacebook campaign and the Cambridge Analytica scandal Facebook was able to increase its monthly active users. Facebook is a monster, and not because of how it behaves socially, but because of the reach and influence it has globally. With 2.6 billion monthly active users as of its last earnings report, the platform has the eyes that companies need to advertise too.
These companies aren't going to put their Facebook advertising money into newspaper advertising. Twitter offers a different bang for the buck and SnapChat just isn't ready for the big time yet. Companies could move their Facebook advertising money to YouTube and Google, but that platform has its own issues for companies to contend with. Companies, large, medium, or small need Facebook. I applaud those that have taken a stand, but I'm sure they will be back, because there are no better options.
Zuckerberg's blunder has created another buying opportunity for investors looking for dominant companies at a bargain price.