Facebook Beats Q4 Forecasts But Sees ‘Significant Uncertainty,’ Ad-Targeting Headwinds in 2021

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Elaine Low
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Facebook beat forecasts on both the top and bottom line when the social media giant reported fourth-quarter and full-year earnings after the close on Wednesday, but shares initially plunged in extended trade as execs noted “significant uncertainty” in the year ahead. And on the call that followed, CEO Mark Zuckerberg had some fighting words for Apple, which he increasingly sees as one of Facebook’s biggest competitors.

Wall Street analysts had expected per-share earnings of $3.22 on revenue of $26.43 billion — Facebook delivered $3.88 a share in earnings on $28.07 billion in revenue. The company also reported average daily active users of 1.84 billion and average monthly active users of 2.8 billion.

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“We believe our business has benefited from two broad economic trends playing out during the pandemic,” said Facebook CFO David Wehner in a statement, starting out with the positives — noting “ongoing shifts towards online commerce” and a shift in consumer demand for products vs. services.

“We believe these shifts provided a tailwind to our advertising business in the second half of 2020 given our strength in product verticals sold via online commerce and our lower exposure to service verticals like travel,” he said. “Looking forward, a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth.”

But Wehner also noted that the company expects “more significant ad targeting headwinds” in 2021, noting platform changes — highlighting Apple’s iOS 14 release — as well as “the evolving regulatory landscape.”

Media Earnings Q4 2020
Media Earnings Q4 2020

The company said that expects to see impact to Facebook from Apple’s platform changes late in the first quarter of fiscal 2021.

“There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress,” continued the exec.

On the earnings call, Zuckerberg said that Facebook would continue to not recommend political and civic groups to users.

He also had some stern words for Apple, touting the privacy strength of Facebook-owned WhatsApp vs. Apple’s iMessage. Apple has “every incentive” to use its dominant platform position to “interfere” with how Facebook’s apps work, added Zuckerberg, “which they regularly do.”

Of the iOS 14 changes, “Apple may say they’re doing this to help people, but their moves clearly track their competitive interests,” said Zuckerberg.

Facebook maintained guidance for total 2021 expenses of $68 billion to $73 billion, capital expenditures of $21 billion to $23 billion and full-year tax rates in the high teens.

In the previously reported quarter, Facebook said monthly and daily active users in the U.S. and Canada had decreased slightly, quarter over quarter.

Shares of the company plunged nearly 6% before quickly paring losses in after-hours trading, after dropping around 3.5% during the regular trading session and outpacing the broader market losses that sent the S&P 500 and Nasdaq each down 2.6%. Facebook’s stock is well off its highs from last summer, when it broke out past the $300-per-share mark last August.

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