Facebook posted stronger-than-expected earnings for the 4th quarter and saw profits increase as revenue streams from advertisements are on the rise and online users continue to creep upward. This comes amid an extremely uncertain climate for big tech companies. Revenue hit $28 billion for the fourth quarter and daily active subscribers peaked at 1.84billion. Such numbers leave many wondering what could be cause for concern.
Uncertain political climate sends stocks sliding
Increased Facebook users and subsequent profits are no real surprise as 2020 saw populations at large being confined to their households on a regular basis. This led to far more individuals being active participants on social media platforms for longer periods of time throughout the past year. What has come as more of a surprise is, although Facebook reported a strong overall financial performance, still found their stock price slipping. Tuesday saw the price of Facebook stock fall below the 52-week high.
With the screws tightening on big tech monopolies, regulatory changes are imminent. Europe is set to introduce new laws which restrict the transferral of users’ data from mainland Europe to the US. With a new administration at the helm in the White House, further regulations may come into play. As such, an uncertain time awaits not only Facebook, but all online platforms that have become synonymous with advertising and mass online social interaction.
For now, Facebook continues to manage the blowback caused by their decision to ban Donald Trump. On top of which, the platform’s promotion and handling of political advertising has put them in an unfavourable light. With the Fair Trade Commission attempting to limit Facebook’s empire, investors are looking to the next quarter for signs of what is to come.
Future outlook
Big tech companies are set to undergo significant changes if legislation is amended in an effort to curtail the overarching dominance that these companies have within the market. From advertising to shaping perceptions and opinions, the tangible and intangible effects of Facebook and the like have merged into one. The eagerness of independent agencies to counteract Facebook’s reach is palpable. Will they succeed? We’re not quite sure.
One thing is for sure and that is that Facebook will continue to dominate the online advertising sphere. Facebook is deeply entrenched throughout the online advertising process. As the company finds itself with the lion’s share of ad revenue, stock analysts are less concerned about impending regulatory changes, and the effect these changes will have on the platform.
Therefore, many see Facebook as an “out-perform” stock over the next 12 months and we don’t see why this won’t transpire. Truth be told, Facebook has established itself as an insurmountable player within the online community and one would be brazen not to back Facebook to continue to drive home its advantage.
