Can Facebook Earnings Save Social Media?

The Facebook (NASDAQ:FB) data breach scandal is changing the way many people think of social media.

Over the past few days, new terms of service for my various accounts are beginning to dot my inbox. Facebook, Twitter (NYSE:TWTR), and the rest of the social media universe are trying to stay one step ahead of the growing backlash. Part of these efforts are these little emails reminding users how transparent these companies are when it comes to our data:

Protecting Privacy

Facebook assures users they aren’t the product (spoiler: they are). Meanwhile, Twitter is empowering users “to make the best decisions about the information you share with us.”

Gosh, I feel better already.

Luckily, it’s earnings season. A good old-fashioned earnings beat should help take some heat off Facebook & Co. as they try to get back in the investing public’s good graces.

Twitter was first in line, reporting revenue of $655 million and earnings of 16 cents per share, beating estimated on the top and bottom line.

Remember, Twitter is still finding its footing. This week’s results mark the company’s second-straight profitable quarter, CNBC reminds us, which is, in fact, only its second profitable quarter ever.

Investors were initially elated. They piled into Twitter stock immediately after earnings hit the wire, sending shares higher by double-digits.

But the gains didn’t last. The stock was already sliding in the early morning hours. Shortly after the opening bell, Twitter dove into the red. The stock finished Wednesday trade down more than 2%.

“From Google parent Alphabet’s strong sales growth getting overshadowed by hefty spending concerns to Twitter’s advertising headwinds outweighing the company’s strong first-quarter results, it seems any hint of trouble is causing past equity bulls to sell,” Bloomberg explains.

Now it’s Facebook’s turn…

King Zuck is attempting to break the earnings curse today. Like Twitter, Facebook posted strong earnings that beat Wall Street’s estimates. Investors apparently like what they see, because Facebook shares are up almost 7% before the morning bell.

Will the Facebook rally stick?

We’ll have to wait and see. If the gains hold and Facebook begins to recover from here, the worst of the company’s public relations nightmare might finally be over.

We’ve spent a lot of time discussing how Facebook’s missteps over the past few months briefly turned America’s favorite social media platform into Public Enemy No. 1.

Earlier this year, you could easily spot the change in sentiment by simply pulling up a few Facebook headiness from your favorite news site. Instead of the financial press tripping over itself to revel in Facebook’s rocketing share price, we were seeing how-to articles describing steps you need to take to delete your account to make sure Zuckerberg can’t get his paws on your precious personal data.

But as we’ve noted all along, this scandal probably isn’t the end of Facebook. After all, Facebook isn’t a vulnerable tech startup trying to find its way in the world as a public company. It’s a money-making machine (as management has proven yet again with stellar first-quarter results).

It will weather the storm eventually. A positive reaction to the company’s earnings beat today would be a great start.

There’s still work to be done to repair the damage. But when the stock flashes a strong buy signal, we’ll be ready…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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