Dan Ives explains why Facebook stock is down despite market-beating results

on Jul 29, 2021
  • Facebook reported its strongest quarter since 2016 on Wednesday.
  • Shares of the company are about 4% down on Thursday morning.
  • Dan Ives discusses the price action on CNBC's "Worldwide Exchange".

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Facebook Inc (NASDAQ: FB) reported its strongest quarter since 2016 on Wednesday that saw a strong boost from a surge in digital advertising. Shares of the company, however, are down about 4% on Thursday morning. A day earlier, Alphabet Inc had also cited strength in digital advertising as it beat Wall Street estimates for fiscal Q2.

Dan Ives’ remarks on CNBC’s “Squawk Box”

Elaborating on the reason why FB investors weren’t impressed of the quarterly results, Wedbush Securities’ Dan Ives said on CNBC’s “Worldwide Exchange”:

“It all comes down to what’s happening with Apple on the iOS in terms of data privacy. This is a game of thrones battle between Apple and Facebook, and that’s what investors are worried about; could there be some more headwinds on the horizon? I think it’s a contained risk at this point, but that continues to be a bit of an overhang on Facebook, which ultimately fan the flames a bit by calling that a bit more than expected.”

Apple to double down on data privacy

Apple’s iOS 14 gives users an option to decline app ad tracking that threatens Facebook because its business model relies heavily on digital advertising targeting. Considering that about 1.5 billion people use iOS, investors are concerned that it could turn into a permanent blow for Facebook as Apple continues to “double down on data privacy”.

As the iPhone maker further prioritises data privacy in its future iOS updates, Ives said, it will “put Apple on the other side with the social media companies,” including Google and Snap that also derive most of their revenue from digital advertising.

In fiscal Q2, Facebook’s average price per ad climbed by 47%. The social media giant delivered 6% more ads in its recent quarter. At the time of writing, the $1.02 trillion company has a price to earnings ratio of 30.84.