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With 95% of Facebook (FB) revenue generated through the ad system, the coronavirus has negatively affected the FB stock value. Facebook is, in turn, trying to preserve its reputation by free WHO service.
Facebook Inc (NASDAQ: FB) stock has dipped down 5.6% in pre-market and continues falling after opening as an analyst warned on the severe impact of the coronavirus outbreak on Facebook ads at large. With Facebook’s main revenue coming from the ads, the negative impact will result in the stock market plunging much deeper.
According to a trusted analyst from Needham, Laura Martin, 30%-40% of the global revenue at Facebook which comes from the ads category is at greater risk from the coronavirus menace. Martin continued to say that around 6-10 of the largest advertising countries which Facebook enjoys are all hit hard by the coronavirus outbreak.
In a note to clients, Martin wrote:
“Our channel checks indicate lower spending in travel, retail, consumer packaged goods, and entertainment, which together represent 30%-45% of Facebook’s total revenue.”
She concluded that the advertising projections have begun to decrease due to a decline in consumer demand.
At the time of writing, the stock was trading at $171.51, which is being considered to be below a critical transition zone. This is because, based on technical analysis, it is trading at a strong support zone on the higher time frame. Whereby, it’s in the lower end of a trading channel, and it might either breakout to continue with the downtrend or respect the upward call.
Facebook has 7 million active advertisers as recorded by the end of 2019, however, since most of them are small retailers, Martin predicted that most will have to stop the process and focus on surviving. She estimated the earning per share for the first quarter at $1.65 from $1.62. however, the consensus stands at $1.92. She further estimated for the second quarter to be lowered to $1.79 from $1.81.
Facebook Stock Fights on Coronavirus
The giant tech company has been hit hard by the ongoing coronavirus outbreak which has spread to where it’s headquartered, Northern California. In a statement to the workers last week, Mark Zuckerberg urged all of the workers to remain at home and work remotely, in order to do a thorough clean-up of the offices.
The company has reported one of its staff members to have contracted the deadly coronavirus. This was a huge blow to the stock market which was previously plunging due to the reprimands from both sides of the political divide on its ad system in this time of elections.
Facebook is now resulting in clinging on giving the World Health Organization (WHO) free ads in order to preserve its reputation and also stay afloat of the business until the coronavirus menace is probably tamed.