What’s going on?

Facebook announced better-than-expected quarterly earnings last week but investors – noticing that users seem weirdly uncool about being watched non-stop – sent its shares down 4%.

What does this mean?

Just as Snap Inc. and Twitter’s updates suggested last week, the digital ad market has been going from strength to strength. And given that Facebook now has 2.9 billion monthly active users – up from 2.7 billion this time last year – and makes virtually all its money by selling their eyeballs to advertisers, the company’s revenue jumped by a better-than-expected 56%.

Trouble was, that was only a 7% uptick in user numbers – the company’s slowest growth in years. What’s more, Facebook warned that sales growth will slow down significantly for the rest of the year too. That might have something to do with Apple’s recent privacy changes, which have made it harder for advertisers on Facebook to target iOS users – in turn denting one of its most lucrative sources of revenue.

Why should I care?

The bigger picture: Everything’s back to normal, right?
Facebook’s announcement comes just a day after positive updates from AppleMicrosoft, and Alphabet. These four companies have now posted a combined profit of around $67 billion in a record-busting quarter, as they ride a resurgence in consumer and business spending that suggests the worst of the pandemic-induced impact is a thing of the past.

For markets: If it’s good enough for hedge funds…
Facebook is one of hedge funds’ favorite stocks right now: 27% of them own shares in the social media giant – more than any other single stock – and 57% of those have it as a top ten holding. That could be an encouraging sign: over the last 18 years, the stocks that have seen the biggest increase in hedge fund ownership have usually gone on to outperform their sector rivals in the next few quarters.

For information purposes only, not intended to constitute financial advice from us. The customer should assess the risk of  potential loss carefully and individually before investing in any financial products. Dabbl Group Limited is authorised by the FCA under the reference numbers 767263 as an appointed representative of its Principal firm VIBHS Financial Ltd, which is authorised and regulated by the Financial Conduct Authority under the reference number 613381.

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