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Of the companies releasing their earnings reports this week, few were as anxiously anticipated as Facebook, Inc. (NASDAQ:FB). The thing is, from day one, I never understood what the big deal was. Facebook essentially discovered that a market research firm misused their members’ data for political purposes. As a result, the markets punished FB stock.
Thus, the bears were circling the social media giant prior to its first quarter release. I suppose they were hoping that further leaks or scandals would be exposed. Unfortunately for short traders, the only thing that got exposed was their emotionally-fueled positions. As is typically the case in such situations, Facebook delivered monstrous results, sending FB stock to the moon.
And, no, my characterization is not hyperbole. Against a $1.35 earnings-per-share consensus estimate, FB stock delivered $1.69, or a 25% positive surprise. The company also delivered very solid revenue results, hauling in $11.97 billion against an $11.4 billion consensus target. More importantly, sales exceeded the year-ago quarter tally of $8.03 billion by a massive 49%.
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During the immediate volatility following the Cambridge Analytica data scandal, many investors wondered: Should I buy Facebook stock now? In hindsight, of course, the answer is a resounding “yes.” But even with this recent bout of bullishness, I’m still optimistic about FB stock.
Part of the reason is that the overriding negativity was based on irrational politics. Look, I get it: most Americans aren’t happy with President Trump. But to try to frame Cambridge as a conduit for Russian trolls to swing the election is, frankly, infantile.
Perhaps the Russians meddled in our election, but who did the actual voting? Worse yet, who stayed at home because they thought Hillary Clinton would win in a landslide?
Blame American apathy, not Facebook stock.
Getting Back to the Fundamentals for FB stock
Ironically, Americans don’t seem very apathetic about the consequences of their apathy. When the scandal initially sparked, the #DeleteFacebook movement started in earnest. What was funny was that when it mattered the least, people showed up.
But this political dynamic perfectly demonstrates that FB bears were thinking emotionally, not rationally. Based on their Q1 earnings report, the social media firm boosted monthly active users (MAUs) to just under 2.2 billion. In other words, if a million users left Facebook due to moral outrage, management wouldn’t care.