The Federal Trade Commission (FTC) just smacked Facebook Inc. (Nasdaq: FB) in the face.
The world’s largest social media company must shell out $5 billion in the biggest penalty the FTC has ever handed down.
Why the big penalty?
Remember Cambridge Analytica? You knew that wasn’t going away.
The FTC is penalizing Facebook for how it handled user data following the Cambridge Analytica breach. Specifically, because Facebook promised in 2012 that it would not give out user data to third parties without consent.
The Cambridge debacle flies in the face of that promise.
In addition to the $5 billion penalty, Facebook is also required to make big changes, including improving its privacy practices, submitting to increased independent review and restructuring its board of directors with an independent privacy committee. By restructuring the board, the FTC hopes to remove CEO Mark Zuckerberg’s “unfettered control” of privacy.
Those are some big words from the FTC. But will they make a difference?
It sounds like a lot of money: $5 billion.
It’s more than we’ll ever see in our lifetimes.
But the $5 billion penalty is peanuts to the world’s largest social media firm. It’s slightly more than 1% of Facebook’s current market capitalization. And it’s about 30% of what the company makes in just three months.
It’s a blip on the radar for Zuckerberg.
If you want to know just how small this “biggest penalty ever” is, just look at FB shares. They’re down less than 1% on the news.
In fact, today’s jitters in FB are likely due to anxiety ahead of this afternoon’s quarterly earnings report — not the FTC’s penalty.
So, if you’re wondering if your FB investment will be impacted by the largest fine the FTC has ever handed out, the answer is no.
Facebook is expected to report earnings of $1.88 per share on revenue of $16.45 billion this evening. It will likely beat those figures.
EarningsWhispers.com puts the “whisper” number at $2.01 per share for earnings. If Facebook hits that target, look for FB investors to forget all about the FTC penalty.
The Good: Snap Back
Here’s one thing you don’t want to get lost in your news feed today.
Social media upstart Snap Inc. (NYSE: SNAP) is back. While the company is still losing money, a $0.06-per-share loss is way better than the $0.27 per share it lost last year.
But the big news was revenue growth of 48% and active daily user growth of 8%. Furthermore, Snap said that its next-generation altered-reality (AR) glasses helped boost growth.
Apparently, these AR glasses are big with the kids. And so is Snap. It now sports more than 203 million daily users, with average revenue per user rising 36% to $1.91 each.
Honestly, I’ve never really taken those glasses seriously and I don’t get Snapchat’s appeal. But the company is doing something right in the social media space. And that’s a big deal when your main competitor is Facebook.
The Bad: This One Oil Will Cure Your Cancer!
No more trips to the waiting room! Doctors hate it!
Cannabidiol (CBD) is reportedly the miracle cure that treats everything. But the U.S. Food and Drug Administration (FDA) isn’t happy. Especially with Curaleaf Holdings Inc.’s (OTC: CURLF) marketing of CBD.
In a strongly worded rebuke, the FDA said that Curaleaf is “illegally selling unapproved products” that contain CBD with “unsubstantiated claims that the products treat cancer, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety, among other conditions or diseases.”
Curaleaf has 15 days to respond to the violations or face legal action.
In a statement, Curaleaf said: “We can reaffirm that nothing in the letter raises any issues concerning the safety of any Curaleaf product.”
That’s a nice refocusing of the argument, Curaleaf, but it doesn’t address the FDA’s claims.
It’s not very reassuring, and investors might want to put CURLF on hold until this FDA situation plays out.
The Ugly: Skin the CAT
OK, this looks bad. Caterpillar Inc. (NYSE: CAT), a key Dow component and economic bellwether, just botched its earnings report. I mean really botched.
The company missed both earnings and revenue estimates by wide margins. It also put 2019 guidance at the lower end of its previous forecast.
But the company sounded upbeat.
“We will also continue to focus on driving operational excellence, including a flexible and competitive cost structure,” CEO Jim Umpleby said in the earnings release.
That many buzzwords makes my head hurt. It also doesn’t mean much, especially when the company has already lowered expectations for the year.
Luckily for investors, CAT has a strong dividend going for it. Right now, I can’t see any other reason for owning the stock.
I imagine this is what high-frequency trading software would sound like if it could speak. That has got to be one stressed-out artificial intelligence.
Great Stuff’s Greatest Hits
It’s Wednesday, my dudes. (It’s a meme. Your kids would get it.)
You’re all probably wondering where this week’s Great Stuff stock pick is.
Well, the Great Stuff filter kicked out two interesting prospects yesterday, and I’m in the process of confirming one over the other. The problem is that the top company in my results reports earnings this evening after the market closes.
Nobody needs that kind of volatility.
Well, options traders do. Do you guys trade options? If so, drop me a line at GreatStuffToday@banyanhill.com and let me know. I’ll see what I can do.
But I digress…
I’m waiting until after tonight’s report to give my final recommendation. Don’t worry, you’ll get your free stock pick this week.
I’ve got your back.
In the meantime, be sure to check out the back issues of Great Stuff on the web. There are some really great stock picks just waiting to be discovered there.
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing