Facebook shares soar over “signs of stability”

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Facebook says it saw “signs of stability” in its business this month after a sharp drop in advertising revenue in March due to the coronavirus crisis, in unexpected optimistic news that boosted its shares by almost 10% in after-hours trading.

Revenues for the first three months of 2020, which come primarily from advertising, increased 17% year-over-year to $ 17.7 billion, just above analysts’ expectations of $ 17.2 billion.

This marked the slowest pace of sales growth since the world’s largest social network listed on the stock market in May 2012, as it experienced “a significant reduction in the demand for advertising, as well as a related drop in the price of our announcements, during the last three weeks of the first quarter of 2020 ”.

However, Facebook added that the sharp drop in ad revenue from the coronavirus has since stagnated, as ad revenue in the first three weeks of April “was virtually unchanged from the same period a year earlier.”

The company also reported increased engagement – particularly in messaging and video calling functionality – with billions of people looking for locked entertainment. Monthly active users in its apps – including WhatsApp and Instagram – totaled $ 3 billion as of March 31, up 11% year-over-year. Ad impressions during the quarter also increased 39%.

The news indicates that Internet companies may be well placed to exit the crisis in the long term. Shares of rival Alphabet rose 8 percent in after-hours trading on Tuesday after the Internet search engine announced that it had started to stabilize in April after a slowdown in March.

The rise in Facebook’s after-hours share price added to a 6.2% increase in normal trading hours.

Decimated by the pandemic, certain industries have reduced their marketing budgets. In a call with analysts, Facebook management said it had seen reductions in the travel and automotive industries, but that games and e-commerce had shown “relative strength”.

Advertising prices fell 16 percent due to slower demand, said David Wehner, chief financial officer, who noted “the potential for an even more serious downturn in the advertising industry” in the future .

However, Mark Zuckerberg, chief executive of Facebook, said he had seen an increasing number of small businesses making “a big effort to connect and make more online sales” given the pandemic, opening up advertising opportunities and electronic commerce.

In addition, last week, the company launched video chat and live streaming features of its apps in a late dashboard to capitalize on the explosion in popularity of these tools among rivals Google and Zoom, so that people virtually socialize during the pandemic.

Facebook has said it will not advertise the new video services or use video call data to inform subsequent advertising, raising questions about how the offer will be monetized.

The company also cut its forecast for year-round spending by at least $ 2 billion, indicating savings from canceled travel, events and marketing, as well as slower growth in workforce.

First quarter earnings were $ 1.71 per share, which broadly matches analysts’ expectations as compiled by S&P Capital IQ. He declined to give guidance on revenues for the second quarter, citing increased uncertainty.

Facebook announced last week an investment of $ 5.7 billion for a 10% stake in the Indian telecommunications group Reliance Jio.

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