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Facebook (FB) Trading Higher After Strong Quarter

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Facebook, Inc. (FB) is trading higher by nearly 2% in Thursday’s pre-market after beating fourth quarter 2020 top- and bottom-line estimates. The social media giant earned $3.88 per share in the quarter, $0.64 better than expectations, while revenue rose 33.2% year over year to $28.1 billion, higher than the $26.4 billion consensus. CEO Mark Zuckerberg reaffirmed 2021 expense and capital expenditure (capex) projections while expecting revenue to “remain stable or modestly accelerate sequentially in Q1 and Q2.”

Key Takeaways

  • Facebook beat fourth quarter earnings and revenue estimates.
  • Political headwinds are finally dissipating, allowing fundamentals to control price action.
  • Two-sided price action is likely into March, but the stock could break out later this year.

Daily Active Users (DAUs) rose 11% year over year to 1.84 billion, while Monthly Active Users (MAUs) grew 12% to 2.80 billion. The company just authorized an additional $25 billion in share buybacks, adding a tailwind at the same time that political headwinds are receding following the transition to the Biden administration. The company also said that it will no longer recommend civic or political groups and is working to reduce the amount of political content.

The push to repeal Section 230 liability protections for social media lost steam when Donald Trump left office, still reeling from Facebook and Twitter, Inc. (TWTR) bans that cut off his main sources of communication to followers. Democrats are unlikely to press for reforms given those actions, setting the stage for a period in which ad revenues guide price action rather than threats or intimidation. In turn, this could clear the pathway to new highs.

Wall Street consensus on Facebook stock held firm through the election and violent aftermath, with a “Buy” rating based upon 39 “Buy,” 3 “Overweight,” 6 “Hold,” and 1 “Sell” recommendation. Price targets currently range from a low of $205 to a Street-high $397, while the stock is set to open Thursday’s session around $70 below the median $345 target. This humble placement adds another tailwind that raises the odds for sustained upside.

Tip

Capital expenditures (capex) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. Capex is often used to undertake new projects or investments by a company. Making capital expenditures on fixed assets can include repairing a roof, purchasing a piece of equipment, or building a new factory. This type of financial outlay is made by companies to increase the scope or add some economic benefit to their operations.

Facebook Weekly Chart (2012 – 2021)

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The stock came public in the low $40s in 2012 and entered an uptrend 14 months later, stalling in the low $70s in March 2014. Price action then eased into a narrow rising channel and traded within those boundaries into July 2018, when it topped out at $219 and broke channel support, dropping to a two-year low. A slow-motion uptick returned to the prior high in January 2020, yielding a quick rally, followed by a failed breakout and 87-point decline into March.

A strong recovery wave reached the first quarter peak in May, setting off an immediate breakout, but momentum didn’t kick in until August, when the stock took off in a vertical impulse that posted an all-time high at $304.67 a few weeks later. Price action since that time has eased into a bearish descending triangle that suggests much lower prices, but that will change if the stock can rally above resistance at $290.

The weekly stochastic oscillator has entered a buy cycle that predicts relative strength into March, but the monthly oscillator remains in an active sell cycle, with the conflict likely to generate two-sided price action. That makes sense, with price embedded around the midpoint of the five-month trading range. Despite the conflict, it looks like the stars are slowly aligning for a breakout that rewards patient shareholders.

Tip

A descending triangle is a bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second horizontal trendline that connects a series of lows. Oftentimes, traders watch for a move below the lower support trendline because it suggests that the downward momentum is building and a breakdown is imminent. Once the breakdown occurs, traders enter into short positions and aggressively help push the price of the asset even lower.

The Bottom Line

Facebook has added a few points after posting exceptionally strong fourth quarter profits and revenue.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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Hopes Google, Facebook deals will underpin a rise in journalism jobs

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“We have seen no guarantees from the big media companies that money raised from the digital platforms will be spent on journalism,” said MEAA Media federal president Marcus Strom said last week.

“If some of this the Facebook and Google’s massive Australian revenue is now to be returned to media companies, there must be a corresponding commitment that the money is spent on news content, not dividends or corporate bonuses. The media companies must provide transparency about how they intend to allocate these funds.“

There are signs at least some companies are already progressing with plans to do just that despite challenging market conditions.

Guardian Australia is expected to take another floor in its Surry Hills office for new employees while industry sources have indicated News Corp Australia, owner of The Australian, The Daily Telegraph and The Herald Sun, is considering hiring almost 100 journalists with the money. News Corp declined to comment.

National broadcaster the ABC has not yet signed any deals with Google or Facebook but has pledged it will use the money to invest in regional journalism.

But Nine, which owns television, radio and newspaper assets (including this masthead) has been less explicit. A spokesperson for Nine referred back to comments made publicly by chief executive Hugh Marks.

Mr Marks said at a Senate inquiry more than one week ago that if funding from tech giants wasn’t secured, job losses at Nine’s publications would continue.

Following the company’s half-year financial results last week, Mr Marks indicated the company would consider hiring new journalists. “You won’t be able to say a dollar here goes to $1 there but you can look at that business and say it’s a strong viable sustainable publishing business that will be able to support journalism going forward,” he said.

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“If there are opportunities for us to employ more journalists to get a positive result then we will do that. But it certainly underpins the future of journalism in this market.”

Seven West Media chief executive James Warburton said most of the money the company expects to gain from its deals with Google and Facebook will be used for Perth based newspaper The West Australian and its regional titles. He initially said the cash would be dropped to the bottom line and be used for repayment of debt but now says it will be focused on improving the newspapers’ digital strategy.

Seven’s deal also has a YouTube component, which means some of the money will be spent on television content.

“It will support quality journalism in metropolitan, regional and community markets and underpin the digital strength and sustainability of our news businesses going forward,” Mr Warburton said.

Industry sources who are familiar with the various agreements have said that some publishers have an audio component – which requires them to invest a large amount of money in areas such as podcasting. Other companies will use the money for distribution strategies to build their digital audiences.

For smaller outlets like Junkee, the money will provide an important backbone for the business to continue its work.

“We haven’t made any definitive decisions yet about how we’ll spend the money, but this moment presents a unique opportunity for us to invest in public interest journalism,” Junkee’s editorial director Rob Stott says. “We’ll be looking at a mix of original reporting and background infrastructure that will make Junkee a more sustainable operation into the future. I’m extremely excited about the potential for this funding to make a real difference to the breadth and depth of content we produce.”

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Facebook banned my perfectly harmless article – and I think I know why

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You start by excluding fascists, anti-vaxxers and conspiracists. You end by banning pretty much anyone you disagree with. In recent months, Facebook has taken to labelling as fake, or removing altogether, a number of stunningly inoffensive pieces: a study by the American researcher Dr Indur Goklany claiming (quite correctly) that the number of people dying globally as a result of natural disasters was falling; a column by the investigative journalist Ian Birrell questioning whether the WHO had been too hasty in ruling out the possibility of a Wuhan leak; a report by the leading Oxford epidemiologist, Dr Carl Heneghan, of a Danish study arguing that facemasks made little difference to the spread of Covid-19.

And, now, an article of mine. Last week, I wrote a piece for the John Locke Institute (JLI), a high-minded organisation that runs summer schools and seminars, mainly for sixth-formers, offering in-depth tuition in the humanities subjects. I advanced the view that the epidemic had made us more collectivist, and that the post-lockdown world would be relatively authoritarian. The JLI bought advertising on Facebook to promote the piece. Facebook first authorised the advertisements, then pulled them without explanation.

In my case, as in all the others, it is impossible to know what the offence was. None of the pieces was making tendentious claims, let alone promoting conspiracy theories. Since Facebook offers neither explanations nor an open appeals process, we can only guess.

Are algorithms set in such a way as to screen out Right-of-centre opinions? Are they overseen by people with an explicit agenda? Is Facebook responding to pile-ons by woke activists? Is the real objection not so much to the content as to the authors?

I suspect the last. A few weeks ago, Think Scotland, a Unionist website, tried to advertise two articles critical of Nicola Sturgeon. Facebook said no on the bizarre grounds that they violated its “Vaccine Discourager” guidelines. The editor, Brian Monteith, suspecting that Facebook was being pressurised by Cybernats, experimentally tried to advertise a wholly unpolitical article about a young mother potty-training her daughter. It, too, was rejected. Eventually, after a campaign mounted by Toby Young’s Free Speech Union, Facebook backed down.

For what it’s worth, I take the view that Facebook, as a private company, can run whatever adverts it likes. But let’s be absolutely clear that it is now a publisher – a publisher with an agenda. Any notion that Facebook (or Twitter, or YouTube) is simply a platform has gone. It is one more opinionated channel, alongside Fox News, Russia Today, the BBC and the Morning Star.

What is most interesting is not the fact that Facebook has its biases – we all have biases – but what those biases are. Bizarrely for a company that was originally meant to facilitate the free flow of ideas, it has become intolerant of dissent – or, at least, of certain forms dissent. You generally won’t get into trouble for denying Stalin’s crimes, boycotting Israel or celebrating Margaret Thatcher’s death. But question whether there is excessive use of state power in enforcing lockdowns or reducing carbon emissions and you may be excluded.

Indeed, we seem to be reaching the point where simply to call for free speech is becoming dangerous. To the extent that the JLI can be said to have a collective view on anything, it believes in heterodoxy. Its founder, a former Oxford academic called Martin Cox, ensures that his summer schools and seminars hear a range of views from top lecturers, and encourages his students to engage with ideas that might initially repel them. That is, if you think about it, the essence of liberalism.

The article of mine which JLI ran, the one Facebook found intolerable, was not about Covid-19 or public health. It was about the fragility of an open society, the way a shared threat can throw people back on their tribal instincts, and the consequent likelihood that powers seized by governments on a supposedly contingent basis in 2020 won’t be relinquished when the epidemic passes.

Any organisation that sees such opinions as unacceptable is – there is no other way to put this – hostile to liberty.

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Tragic reason why man tried to live stream death on Facebook

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A man who threatened to live stream his own death on Facebook after he was denied euthanasia despite a viral campaign now plans to travel to Switzerland to end his life.

Alain Cocq, 57, who suffers from a disease that is so rare that it does not even have a name, says he is in a permanent state of suffering.

His case went viral in September 2020 when he threatened to live stream his death on Facebook if French President Emmanuel Macron did not change the country’s laws to allow for assisted dying.

He had to give up on his project after Facebook cut the feed, but he is still advocating for changes in law and has now decided to go to Switzerland to be able to benefit from euthanasia there.

He is applying to the authorities in the Swiss capital Berne and he hopes to receive a positive response in the coming months, if not weeks.

Alain Cocq is now travelling to Switzerland after he was denied euthanasia. Source: Newsflash/Australscope

Alain Cocq is now travelling to Switzerland after he was denied euthanasia. Source: Newsflash/Australscope

Cocq suffers from a rare form of disease that has been described as being similar to ischaemia, which is when a restriction in blood being supplied to live tissue causes an oxygen shortage that damages the tissue and can cause dysfunctions.

There is no cure for his condition, which will, very slowly, prove fatal.

“I want end of life to become the primary theme of the presidential elections in 2022,” he told local French newspaper 20 Minutes.

Despite his appeal to the French president in September, President Macron said he was “unable to accede to his request” despite the “profound respect” he had for him.

The retired plumber, who has been ill for 34 years, is hoping the Swiss will help him end his life after a failed attempt with the European Court of human rights in 1993 and a first petition to the French government in 1994.

At the time, he was still in a wheelchair, but after that numerous cardiovascular and cerebral accidents rendered him permanently bedridden.

Australscope

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