Facebook's recent first-quarter-revenue warning is a signal that widespread business closures and stay-at-home orders will sink Facebook's ad revenue for the foreseeable future, Needham's Laura Martin wrote in a note on Wednesday.
"We expect FB's global ad revenue to be volatile and unpredictable until Covid-19-related consumer demand and several important advertising verticals" rebound worldwide, Martin explained.
"This adds risk to the discount rate for all ad-driven business models, including FB, which is virtually 100% ad-driven."
Facebook shares at last check were up 0.3% at $161.50.
In a blog post on Tuesday, Facebook said that despite a spike in usage across its messaging products, its overall business "is being adversely affected like so many others around the world."
Facebook earns substantially all its revenue from advertising. According to Martin, roughly 30% of its ad revenue comes from categories at risk from the virus, such as travel and films, and many of its advertisers are small companies likely to pull back spending.
Further, Facebook has no presence in China - the country that dealt with the virus first - but is widely used in Western markets where the pandemic is expected to spread and cause economic dislocation for months to come.
That means Facebook's fiscal 2021 revenue could be 4% lower than current consensus, at $95.9 billion, and its profit 6% lower than expected at $10.17 a share. Martin noted, however, that the outlook is uncertain and estimates may change.
Facebook said on Tuesday that it's seen dramatic increases in usage of Messenger, WhatsApp and other services in countries such as Italy that have been hard hit by the virus. Those services aren't yet well monetized, however.