Facebook’s Revenue Hit From Ad Boycott Will Be ‘Minimal,’ Wall Street Firms Say

With over 500 companies having now joined the advertising boycott of Facebook called for by top civil rights groups, some investors are concerned about the company’s lost revenue—but most Wall Street firms estimate that Facebook is still looking at less than a 5% hit to overall revenue.

 

Facebook shares initially plunged by 8% last Friday amid an increasing number of big brands—most recently joined by Pfizer, Lego and Dunkin Donuts—announcing that they will stop working with the tech giant as part of the #StopHateforProfits campaign, which has now grown to include more than 500 advertisers.

 

But Wall Street firms generally remain quite bullish on the stock, with the large majority reiterating buy ratings: Facebook is looking at a less than 5% hit to its overall revenue, said Rohit Kulkarni, an analyst for MKM Partners, in a recent note.

 

In a scenario where the company loses business from its top 100 advertisers, that would only be around a $1 billion hit to revenue per month, Morgan Stanley analyst Brian Nowak estimates.

 

If the ad boycott only lasts one month, according to Citi analysts, the likely impact on Facebook’s stock is just $1 per share, and if Facebook is unable to convince the companies who are boycotting to resume business, the impact on its stock would be $17 per share, they estimate.

 

Advertisers were already winding down spending amid the coronavirus pandemic, Kulkarni notes, but Facebook has a diverse revenue base, with millions of paying advertisers; Procter & Gamble, for example, is the largest advertiser in the world but is estimated to account for less than 0.50% of Facebook’s revenues, he said.

 

Raymond James analysts similarly believe the financial impact on Facebook during the third quarter will be “minimal” and they remain “optimistic” that the company’s recently announced changes will “help alleviate advertiser concerns.”