Facebook (FB, Financial) reported strong revenue growth; +26% currency adjusted and +21% growth in adjusted operating income during its fourth quarter. The stock has sold off since COVID-19 spread to Western economies, where Facebook generates the majority of its profits. However, we estimate Facebook has relatively small exposure to travel and hospitality advertising – so far, the most negatively affected industries – while we also believe the Company’s platforms are well positioned to benefit from a reprioritizing of marketing budgets toward digital channels during this crisis. During the first quarter 2020, Facebook’s stock traded as low as 13X 2021 consensus estimates, which is much too pessimistic for a company with Facebook’s long-term position as a winner in enabling advertising and commerce, combined with a massive net cash pile and spiking user engagement during the crisis. As such, we added to our already overweight position in Facebook.
From David Rolfe (Trades, Portfolio)'s Wedgewood Funds first-quarter 2020 shareholder letter.
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