Please ensure Javascript is enabled for purposes of website accessibility

Why Facebook Stock Popped Today

By Jeremy Bowman – Updated Apr 29, 2020 at 12:38PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the social media giant rose after rival Alphabet passed its earnings report.

What happened

Shares of Facebook (META -4.04%) were cruising higher today, riding the coattails of rival Alphabet (GOOG -2.61%) (GOOGL -2.70%), whose stock jumped nearly 10% on a better-than-expected earnings report. Since both Facebook and Alphabet's Google dominate the market for digital ads, investors viewed the good news for Alphabet as good news for Facebook, which will report its own first-quarter earnings report after hours today.

As of 11:29 a.m. EDT on Wednesday, Facebook shares were up 5.8%, while Alphabet shares had gained 8.4%. 

The "thumbs-up" sign at Facebook headquarters

Image source: Facebook.

So what

Alphabet said revenue in its first quarter rose 13%, down from 17% in the year-ago quarter, and adjusted profits declined. It also warned that the second quarter would be difficult, and said it would cut back on hiring and marketing spending. But investors seemed to think that the results and its outlook for the rest of the year were not as bad as feared, and that its advertising business, which is closely tied to the health of the global economy, will recover as macroeconomic conditions improve. 

Facebook has already told investors that its ad business was weakening in an update back in March, even as usage of many of its products has spiked as people around the world look for ways to connect online while they shelter in place. Investors may also be encouraged by reports from marketing firms Gupta Media and Socialbakers that show Facebook's ad business starting to recover in April.   

The surge in Alphabet shares today seems to indicate that Facebook and Alphabet were oversold on fears about a decline in the ad business, since both companies dominate their respective spheres of the digital world and aren't at risk of losing their leadership.

Now what

Looking ahead to Facebook's first-quarter earnings report this afternoon, analysts are expecting revenue to increase 15.9% to $17.5 billion, and for earnings per share to come in at $1.74, down from an adjusted total of $1.89 a year ago. Investors will also be focused on management commentary and guidance on the rest of the year to see how the company expects to perform over the duration of the crisis. Facebook stock has already bounced back 40% from its lows during the crisis, therefore much of its recovery may already be priced in.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$133.45 (-4.04%) $-5.62
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$98.68 (-2.70%) $-2.74
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$99.57 (-2.61%) $-2.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.