I added more to my Facebook Inc (FB) position today at $182.34 making Facebook my new 2nd largest holding.
The recent pullback makes for a good opportunity to add more or initiate a position. The valuation isn’t as good as it was last year, but it still has a PEG of around 1! It’s also trading under most of it’s averages.
Facebook is under continued pressure from the government due to size/ influence, role in protecting data and political speech/advertising. I believe the fears are overblown and this poses a good opportunity.
In most scenarios, the shareholders should continue to thrive. If the company should be broken up, then shareholders receive pieces of strong companies which could actually perform better independently on a share price basis. I feel there are good synergies with the company remaining intact, but it’s certainly not the end of the world and I think it’s unlikely. Most likely, there will be increased regulation which Facebook will most likely be involved in writing and they will have less problems working with. Any new regulation will make it worse for smaller competitors and perhaps scare new entrants into the industry. In effect, if more regulation is enacted and more responsibility placed on social media companies less entrepreneurs will want to be involved in the sector.
Facebook, Messenger, Instagram and WhatsApp still dominate the social media sector and Instagram is favored by Generation Z. We use Facebook a lot in our business and it has become one of the top tools to create awareness for products/services. It provided unprecedented access for anyone to markets they would never been able to access before. For as little as $5 you can target an extremely targeted niche within minutes. You combine Facebook advertising with some Google Ads and you’ve got a very powerful combination, which is what we do for many of our clients at Advantage Creations.
Here is a comparison of the interest over 12 months in some of the top social media platforms in the US:
Youtube is the biggest threat to Facebook which is why they have been making more effort into video with Facebook Watch.
My impressions based on my own spending and the increased aggressiveness I’ve seen of Facebook sales people to sell ads that revenue and earnings will be good with the next earnings report. It’s possible that with all the distractions and increased spending on content monitoring and legal issues that they don’t surprise, but I’m leaning more towards a positive surprise.
Here is my previous analysis: Facebook Inc (FB) – Buy