For All Its Troubles, Facebook Drives Social Media ETF Higher

For the month ending July 10, the Global X Social Media ETF (NasdaqGM: SOCL) jumped 17%, an impressive rally under any circumstances, but one made more so when considering the spate of controversy surrounding Facebook.

Facebook isn’t just the largest social media company. The stock is one of the largest holdings in SOCL, the original social media exchange traded fund. SOCL tracks the Solactive Social Media Total Return Index and currently resides around all-time highs.

“Facebook (ticker: FB) is in the middle of a global boycott from 1,000 advertisers, brought to task by a coalition of civil-rights groups that cite hate speech and voter suppression that appear on its platform,” reports Max Cherney for Barron’s. “Most stocks would crater under that kind of pressure, but not Facebook. Its shares have appreciated roughly 4% since the organizers announced their 10 demands in June, which include fact-checking political advertisements.”

A group of organizations called on Facebook advertisers to limit their ad spend during the month of July, urging more than 90 marketers like Verizon, Patagonia, REI, Lending Club, The North Face, Ben & Jerry’s to join forces with a group of organizations which includes the Anti-Defamation League, the NAACP, Sleeping Giants, Color of Change, Free Press and Common Sense.

Facebook, SOCL Share Prices Avoid Drama

Integral the long-term social media thesis are factors including mobile penetration and large companies embracing social networking as an avenue for attracting new customers. Those factors and others are expected to lift average revenue per user (ARPU).

“Facebook is well insulated from advertiser defections, even with big brands like Coca-Cola, Unilever, and Starbucks pausing their spending. Facebook has eight million customers, mostly small and medium-size businesses, buying ads,” according to Barron’s.

Facebook has some avenues for dealing with controversy. Facebook, the largest social media company, recently provided some support to SOCL by announcing plans for forge into the fast-growing e-commerce arena. Facebook announced Facebook Shops, which will facilitate easier listing of products on Facebook and Instagram. Plus, Wall Street remains bullish on the stock.

“Wall Street estimates for Facebook’s 2020 sales and earnings have barely budged in the past month. In fact, its revenue outlook is slightly higher than it was at the end of May, before the boycott began. Analysts currently forecast Facebook to generate net income of $21 billion this year, or $7.30 a share, up 14% from a year ago. And they see $77 billion in revenue, up 9%, despite the pandemic,” according to Barron’s.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.