Why Jim Cramer's Action Alerts PLUS Is 'Holding Onto' Facebook

Katherine Ross

Facebook reported earnings on Thursday

The social-media giant, which relies largely on advertising as its income stream, earned $5.18 billion, or $1.80 a share, in the quarter, compared with $2.62 billion, or 91 cents, in the year-earlier quarter.

Revenue reached $18.69 billion from $16.89 billion a year earlier.

A survey of analysts by FactSet produced consensus estimates of earnings per share of $1.39 on revenue of $17.34 billion.

In the second quarter and in the first three weeks of July, ad revenue grew 10% from a year earlier. Facebook said it expected a similar growth figure for full third-quarter ad revenue.

That figure is subject to a number of factors, including the pace of economic recovery; a potential easing of usage of the site as lockdowns are lifted; the potential impact of the boycott; and headwinds including regulation, like the California Consumer Privacy Act, Facebook said. 

Investors, including Jim Cramer's Action Alerts PLUS portfolio, looked through Facebook's results for the dual impact of COVID-19 and a significant advertiser boycott -- arising from complaints about hate speech on the platform -- on its ad-based business model.

“[As] shelter-in-place restrictions continue to ease, we expect the number of Facebook daily active users and monthly active users to be flat or slightly down in most regions” in Q3 compared with Q2, Facebook said.

Full-year 2020 capital expenditures should come in around $16 billion, the high end of the company’s estimate of $14 billion to $16 billion, “as we have resumed data-center- construction efforts earlier than expected," the company said. Facebook also said that outlook remains conditioned on how covid-19 affects its ability to build those projects.

And the company expects a full-year tax rate in the mid-teens percent. The rate was 16% in Q2.

Jeff Marks says that the Action Alerts PLUS portfolio is "holding onto" Facebook

You can follow Katherine Ross on Twitter at @byKatherineRoss.

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