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Facebook Stock Fell, Don’t Forget What Libra Could Do


Mar. 2 2020, Published 7:35 a.m. ET

Last week was tough for Facebook (NASDAQ:FB) stock despite recent gains in the company’s Libra project. The stock fell 3.78% on February 27, which put its loss last week above 5.0%. The fall pushed Facebook stock toward what could be its worst week so far in 2020 and into negative territory YTD (year-to-date). The stock has fallen 7.55% YTD as of February 27.

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Coronavirus fears weigh on Facebook stock

The final week of February was tough for stocks. The Dow Industrial Average fell 4.42% on February 27. Meanwhile, the S&P 500 recorded a similar decline as the Dow. The tech-heavy Nasdaq Composite fell 4.61%. The spread of the deadly coronavirus caused panic among investors, which sparked the stock sell-off.

Facebook stock logged some big gains this year. For example, the stock rose after the company reported strong fourth-quarter earnings. However, the coronavirus-induced sell-off last week pushed the stock into negative territory YTD. The stock has fallen 7.55% YTD as of February 27.

Coronavirus impacts businesses globally

The deadly virus, which broke out in China in December 2019, has spread to several countries. The virus has impacted global business activities. More than 80,000 people have caught the virus, while nearly 3,000 people have died from it. This week, Baidu (NASDAQ:BIDU) issued downbeat first-quarter revenue guidance. The company said that the virus impacted the advertising business. Baidu is China’s top Internet search company with over a 60% market share. Notably, advertising is the company’s main revenue source.

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The coronavirus situation has impacted business activities. For example, Walt Disney (NASDAQ:DIS) closed its theme parks in Hong Kong and Shanghai, China. The company made the move in a bid to try and keep the virus from spreading. McDonald’s (NYSE:MCD), Starbucks, and Apple also have closed some stores in China. All of these companies spend big on marketing. Therefore, the challenges could reduce ad spending and hit sales at companies like Baidu and Facebook. Advertising is also Facebook’s main revenue source. Although the company doesn’t operate in China, it has advertisers in the country. The company makes over $5.0 billion annually helping companies and organizations in China run international ads. Facebook reaches 3.0 billion people daily across its social apps, which makes it a powerful advertising tool.

Tailwind for the Libra project?

In June 2019, Facebook unveiled a plan for a cryptocurrency product called “Libra.” Currently, the stock is about flat since the Libra unveiling due to the recent sell-off from coronavirus fears.

Facebook unveiled Libra with 28 inaugural members. However, eight of the members have dropped out. PayPal was first, while Visa and MasterCard followed. Vodafone also left Libra to focus on developing its Mpesa mobile money platform, which is popular in Kenya.

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Original members leaving isn’t the only setback Facebook has faced with Libra. The other challenge has been securing regulatory approvals to launch the product. However, the company continues to press on with Libra. Facebook has started replacing the members that left the project. Last week, Shopify (NYSE:SHOP) joined the Libra project. The company will contribute money to make the project a reality. Shopify is emerging as a powerhouse in the e-commerce space. The company operates a platform where merchants can set up digital shops to sell to online shoppers. So far, the platform has attracted over 1.0 million merchants.

Cryptocurrency broker Tagomi has also joined the Libra project, which provided a boost. Tagomi could be a very valuable partner for Libra. The expertise and experience that the company brings could help Facebook in its efforts to secure regulatory greenlights for Libra, as reported by TechCrunch.

Why is Libra important and what could it do for Facebook stock? The company wants to develop Libra into a global digital currency that would simplify everyday money transactions for businesses and consumers. As we discussed previously, the aftermath of the coronavirus could boost the uptake of digital payment solutions. Increased uptake of digital payment solutions would be a boon for Facebook’s Libra if it succeeds.


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