Facebook, Inc. FB could see headwinds in its business as travel, retail, consumer goods, and entertainment companies slow down their online advertising spending, according to Needham's Laura Martin.
What Happened
The coronavirus is already impacting Facebook's business, most notably the delay of the James Bond movie erases $50 million in potential ad revenue, Martin said on CNBC. The four categories account for 45% of all digital advertising revenue in the U.S. and 30% worldwide.
Investors may be guilty of underestimating Facebook's exposure to the coronavirus given the margin rich nature of online ads, she said. Facebook and some of its peers deserve much credit for doing the "kind and humanitarian" act of paying hourly workers who need to stay home. But at the same time, this will "blow up" Facebook's income statement even more.
Why It's Important
Martin would "stay away" from all ad-driven stocks, which are dominated by a fixed cost structure with 70% margin rates.
Facebook's stock and the broader market don't seem to be nearing a bottom and only when it does can investors return to "start putting money back to work," she said. For the time being, the impact on consumer demand is unclear.
Facebook's stock traded around $174.88 per share at time of publication.
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