Facebook (FB) Election Boost Simmering Down as Shock Wears Off

NEW YORK (TheStreet) -- If Donald Trump's four years in office as President of the United States are half has provocative as what went on during the election, than social media giants such as Facebook (FB) will continue to bring in those political dollars.

If you've opened Facebook in the last few days you've probably noticed several dozen, or more, political posts from friends all expressing their joy or disappointment with Trump's victory. But as the sensation of the election winds down this week, Facebook and other social media platforms will need to find a way to keep that momentum going.

Facebook has been discussing recently the things that have been driving its business, be it ad load, the shift to mobile, or rising ad rates, Bloomberg News tech reporter Cory Johnson noted in an appearance on "Bloomberg Markets: Americas" Thursday afternoon.

"Fundamentally they also talk about how many posts are going up there and regardless of where you stood in this election, when you look at Facebook's ad revenue and the way that they've been able to grow that in recent quarters. The company warning that they're just not going to see the kind of growth that they've seen lately and the wind in their sails the last few quarters has been this election and the heat of commentary about it on the Facebook feed. That ends this week," Johnson explained.

About 44% of people get their news from Facebook, a "fairly biased view," BloombergTV's Vonnie Quinn noted as she asked Johnson about the future of social media under a Trump Presidency.

"I think that fundamentally the big spending we saw by political campaigns, and let's not forget all the local propositions, all the state propositions and amendments that were going out across the country, all the local candidates who could target advertising and Facebook unlike just about anywhere else, that all goes away," Johnson responded.

This political season saw much less spending on ads than what was expected, one factor in that being the Trump campaign didn't spend the way Republican campaigns have done in the past, resulting in Democrats not responding the same way as before.

"So you saw a handful of traditional media companies really suffer," Johnson continued. "I was struck by the results from Gray Television (GTN), it's an owner of original networks particularly in the South, they came out with earnings this week that were vastly disappointing...and they flat out said the lack of spending on political advertising caught them by surprise [and] hurt their business."

That boost the company would receive every four years didn't happen this time around and Johnson believes we can expect the same kind of thing hurting Facebook.

"Here is why this matters to everyone watching this who could care less about Facebook or even politics -- 25% of the gains on the S&P 500 in the last year were all the gains in one stock -- in Facebook. So if Facebook falters, the S&P 500 falters. If the S&P 500 falters then all of the market [will] be dragged down by this lack of advertising that was helping Facebook's results," Johnson said.

(Facebook stock is held in Jim Cramer's charitable trust portfolio Action Alerts PLUS. See all of Cramer's holdings with a free trial.

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate FACEBOOK INC as a Buy with a ratings score of A-. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

You can view the full analysis from the report here: FB

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