When hundreds of companies joined in solidarity to boycott advertising spending on Facebook (NASDAQ:FB), it sent a red flag. Facebook staged a V-shaped recovery. Companies claiming to support a cause are cutting ad budgets. The only reason to cut spending is due to weak sales.
Investors should avoid companies whose sales are slumping. The pandemic is nowhere near over in the U.S. This will add more pain to Coca-Cola (NYSE:KO) or Starbucks (NASDAQ:SBUX). Consumers will cut off spending on non-essential goods. Plus, staying at home or working from home will lower the demand for such goods.
Investors should add to Facebook and consider Twitter (NYSE:TWTR). Snap (NYSE:SNAP) will come out ahead because companies are not boycotting it. And why would it? The site is still hot with the key, young demographic.
Your Takeaway
The ad boycott will increase the inventory of ad units. This ultimately benefits independent small companies that compete with bigger companies. If this small business group buys more ads, Facebook will not experience much of a drop in revenue.
Analysts are bullish on Facebook’s prospects with an average price target of $249. The average PT on Twitter is $30.68 and $21 for Snap.
