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
I added more to my position today in Facebook Inc (FB) at $157.73.
Now my 7th largest holding. I still think at this level, it’s a great opportunity.
The recent pullback again brings the price to lower than my previous purchases. I imagine this is due to recent issues with hacked accounts, more spending on security/privacy which will lower earnings in the short term and of course the data leak scandal. I believe the fears are overblown and this poses a good opportunity.
I mentioned in the my previous post/purchase that if the price should continue to drop, I would consider adding more and that I would be willing to double my then current position. That’s what I just did today. This purchase doubles my total holdings in Facebook.
I added more to my position today in Facebook Inc (FB) at $160.32.
Now my 8th largest holding. I still think at this level, it’s a great opportunity.
The recent pullback again brings the price back to near my first purchase. I imagine this is due to the earnings release coming out later today and fears over the impact of the news feed changes and data leak scandal. I believe the fears are overblown and this poses a good opportunity.
As for the newsfeed changes. I feel that reducing page based content should help boost revenue/earnings in that pages will need to rely on paying to have their posts shown.
However, if they should have made an impact the price continues to drop, I will consider to add more at lower prices depending on the severity of the news and impact to the business. I would be willing to double my current position from here.
I initiated a new position today in Facebook Inc (FB) at $159.80.
I’ve been following Facebook for some time as I’m a regular user and I utilize their advertising platform for our own and client businesses. I feel their advertising platform is a very good value and great for targeted campaigns to build awareness. I also use Google for advertising more for campaigns targeting those ready to buy or with a specific need in mind. I have higher budgets with Google than I do for Facebook campaigns. However, Facebook & Instagram (which Facebook owns) campaigns have been steadily increasing in share of total budgets. Most recently have I have been using Facebook’s remarketing campaigns which is where you target people that have already visited your site. You then place ads to encourage them to come back to your site. These are particularly powerful as these visitors have already shown interest in your offer. Both Facebook and Google do this well. However, overall I think Facebook’s ability to target within their advertising system is better than Google’s at this time and the value is better.
Reason for current opportunity
The share price for Facebook has been under a lot of pressure due to the recent scandal involving a data breach with Cambridge Analytica and the Federal Trade Commission’s announcement of an investigation into the company’s abilities and willingness to protect user information. It has been said that the negatives of this are overblown and that any downside is already well priced into the current stock price. The platform is still very strong and there doesn’t seem to be any signs that revenue/income will not continue to grow.
Facebook is the largest social media company in the world with more than 2 billion monthly active users. They have continued growth in users and user engagement. Their platform provides advertisers an extremely valuable tool to target customers. They have been successful where most of the peers such as Twitter and Snapchat have not. They have the capital and earnings power to continue to innovate and acquire firms that may supplant the flagship Facebook.com website in the future, as they did with Instagram.
Facebook currently trades at a 22.2 forward PE and PEG of 1. The PEG payback in years is 7.9. They have impressive margins and revenue/earnings growth. I feel at this price, there is little risk and a high probability the value of the company will be much higher years from now.
I believe the current stock price drop represents a great opportunity for those not currently invested or with a small position in Facebook. If the price should continue to drop, I will most likely add to this initial position.