Internet Giants Like Facebook and Netflix Suffer from the Brexit

The U.K.’s vote in favor of leaving the European Union last week has led to falling markets across the world including the U.S. Not just stocks, bonds, foreign exchanges and gold are right now under the influence of the straggling in Europe following the Brexit, Internet giants such as Facebook (NASDAQ: FB) and Netflix (NASDAQ: NFLX), according to CNBC’s Julia Boorstin reported on “Squawk Alley” Monday, take a stronger than expected hit.

Facebook (NASDAQ: FB) stock is down by 2.87% to $108.86 early Monday afternoon, while shares of Netflix are slipping by 3.06% to $85.73, and Salesforce stock is lower by 3.11% to $75.98. 

Separately, although the Street Ratings rated Facebook as a “buy” with a score of A-, it is not meant to be regarded as reassuring because the Street Ratings objectively rated this stock according to its “risk-adjusted” total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from the reality right now.

On the one hand, Slowing European advertising demand or currency translation issues could hurt Facebook’s valuation according to Needham & Company’s Laura Martin, who also added that Facebook generated about 24% of its revenues in Europe last year.

On the other hand, privacy issues come into play when considering the consequences of the Brexit. Martin told Boorstin that all of (Netflix’s) growth story and capital investment is offshore, and if either demand or currency translation slow their growth, their multiple is price for protection. Additionally, Jefferies estimated that 50% of Netflix’s international revenues come from Europe and a third of that from the U.K. alone.

“It’s not that people will stop using Facebook or Netflix. It’s that recession in Europe could really hurt the growth and consumer and advertising spending, as well as currency exchange, for these companies,” Boorstin said, “The U.K. has pushed the E.U. to take a lighter touch on regulating Google and other companies on concerns that the likes of France and Germany might push for a crackdown on these tech companies.”

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