Facebook Flying

Facebook stock has been quite weak lately. If you look at the two year chart below, you can see that it peaks at $210 a share in July 2018, and has slipped steadily since then, to $154 at the close last Friday. What gives?



Well, the overall market has been softer in recent weeks, but Facebook has also had company specific problems, mostly relating to data leaks, privacy concerns and regulatory challenges. Perhaps more importantly, some fear that its user engagement is slipping, and advertisers are deserting the platform? The pundits usually forget that the Facebook group has multiple platforms, and the secondary ones like Instagram and WhatsApp are booming.

The Goldman Sachs analyst who covers Facebook is Heather Bellini, and she has developed a system of "channel checks" with major advertisers, in order to predict revenues. The following text is a shortened version of a report she published this morning.

Our checks point to a strong quarter - some advertisers accelerated spending while others slowed down. Despite the privacy and GDPR concerns, we continue to see strength in Facebook and Instagram spending .. both emerging and legacy companies are increasing their direct-to-consumer advertising spend, and Instagram Stories are gaining share as they are seeing better conversion and delivery rates. Multiple partners cited the strength in Instagram user growth as a key driver for incremental inventory, offsetting the deceleration partners are seeing in the core Facebook app.

Our European checks also underscored strong spending on both Facebook and Google, though one check noted user growth beginning to slow in the UK, similar to what has been seen in the US/Canada. Another partner saw no impact in the quarter from GDPR or engagement issues in Europe, and expects continued strength across EMEA.

Facebook results are out on October 30th, although we will probably have to wait until 2019 to see what is going on, especially with revenues over the key festive season period, when advertisers really get stuck in. For now, we hold, as usual.