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Facebook (FB): Should You Buy The Stock Now?

Carla Olson | 7:31 am ET, 20 Mar 2018

The data incongruity issue has created a pressure on Facebook’s stock performance, which is down 6.79% in yesterday’s trading.  

Facebook is under huge pressure for letting the data company Cambridge Analytica acquire 50 million user profiles in the U.S., which the firm might have used to help Donald Trump in his election campaign.

The sell-off was instigated by a stipulation that Facebook allowed Cambridge Analytica to violate its terms of service since the firm used the data acquired by user submissions for commercial purposes.

From our perspective, the market might have over-reacted, since this problem was detected early and it was well taken care of by Facebook’s management.  

Facebook knew about the violation and blocked the controversial Cambridge Analytics application in 2015. The internet giant also ensured that all data acquired illegally was permanently destroyed.  

It is questionable whether all of the data was actually erased.

So we think this may be a buying opportunity for long-term Facebook investors.Based on Finstead research, Facebook’s stock price upside is 30%.

It is clear that the Facebook leadership team is trying to do the right thing to ensure consumer confidence.  

How high can the stock price go? According to Finstead, the average price target is almost $223.


Even though Facebook’s valuation is fairly high compared to its peers (its P/E ratio lags only that of GOOGL, SINA and TWTR), we see a potential for stock price appreciation because of the company’s high revenue growth (visit Finstead and type “FB growth” to get a sense of how high it is).  

Do you think Facebook will bounce back?

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Snap Inc: Here Is What You Need To Know Prior to Earnings Call Today

Carla Olson | 2:58 pm ET, 06 Feb 2018

Snap Inc. is reporting earnings today after market close. The report will be for the fourth quarter last year that ended in December 2017.  According to Finstead Research, SNAP price target upside is -7.36% (visit Finbot and type "SNAP upside"). 

Here is what you need to know about Snap Inc. 

Snapchat is enhancing its services by developing engagement features such as Geofilters and context cards to find information about geotagged places, and incorporating 3D Bitmoji World Lenses in collaboration with Jeff Koons, a prominent artist.   It is also removing its dependency on search engines. 

According to a market research firm eMarketer, Snapchat has a higher number of teen users compared to Facebook and Instagram.  Also, the introduction of the location-based map feature has caused a 40% surge in the submission of stories.

Its investment in advertisement measurement solutions, collaboration with NBC News and Time Warner and incorporation of ESPN’s SportsCenter to the platform will play a significant role in attracting new subscribers.

But there are a number of items that worry investors about Snap Inc. 

Facebook and Instagram have been very successful at mimicking Snapchat's features. 

The absence of revenue diversification is apparent and becomes even more pronounced with a 60% year-over-year reduction in ad unit costs (i.e., cost per thousand impressions).

Snap spent roughly $40 million on the hardware product called Spectacles, which went nowhere. 

Also, Snap is not making significant efforts to attract an older generation.  It is competing head-to-head with Amazon Prime, Netflix, Hulu and Time Warner’s HBO in the video streaming market; however, its competitive advantages are unclear to investors.  

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


FAANG Pullback Inevitable in 2018?

Carla Olson | 8:09 am ET, 02 Jan 2018

FAANG

As you're entering 2018, you may be wondering which stocks that you own in your portfolio are bound for a 'correction' in 2018.  

The scale of the FAANG rally in 2017  has led some investors to believe that this group has been overdone as an investing theme, especially given signs of overvaluation. 

Facebook, Amazon, and Netflix were up more than 50% over the last 12 months; Apple's gain was over 50%, and Google 'trailed behind' with 30%+ annual stock price growth.

And the FAANG stocks weren’t just market leaders this year; they accounted for a sizable portion of Wall Street’s overall move higher. 

How do the analysts feel about these stocks?  Morgan Stanley said it is still positive on the group, but macro factors could be concerning.  History indicates that returns may moderate their pace and Morgan Stanley analysts question whether growth can be sustained in the upcoming period.  

Apple investors should be especially worried about the $1,000 price tag on the iPhone X that may cut into first-quarter demand.

The group may be less well-insulated from cyclical pressures that many investors anticipate will increase over the next couple of years.  These stocks are tied to the cycle via advertising and consumer spending.

Here is a look-back on Facebook and Amazon stock performance.  Over the last year, FB returned +52.54%. This return is higher than Internet Information Providers sector (42.56%), Technology industry (26.77%), S&P 500 (18.87%) returns.

Over the last year, AMZN returned +52.98%. This return is higher than Catalog & Mail Order Houses sector (20.39%), Services industry (4.74%), S&P 500 (18.87%) returns.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Facebook, Inc. (FB) Buy or Sell Stock Guide

Updated at: 12:30 pm ET, 24 Dec 2018

The analysis below may be helpful to you if you have any of the following questions about FB stock:

  • Is FB a buy or a sell?
  • Should I sell or hold FB stock today?
  • Is FB a good buy / a good investment?
  • What are FB analyst opinions, recommendations, ratings?

Here are FB stock buy reasons/signals:

1. With more users and usage time than any other social network, Facebook provides the largest audience and the most valuable data for social network online advertising.

2. Facebook’s ad revenue per user is growing, demonstrating the value that advertisers see in working with the firm.

3. The application of AI technology to Facebook’s various offerings, along with the launch of VR products such as the Oculus Rift, will increase user engagement, driving further growth in advertising revenue.

4. Facebook has witnessed significant traction in online and mobile advertising spending in a short span of time. In 2017, mobile ad revenues grew 56% over 2016. The company stated that mobile conversions are on the rise as data from 17 markets showed that mobile accounted for 69% of online conversions on Black Friday and 64% on Cyber Monday.

5. Facebook is aggressively promoting “Live” in order to boost its top line. It intends to capture the opportunity presented by ever-increasing video viewing on social media platforms. Earlier, Facebook had mentioned that video was emerging as a “megatrend” on the same lines like mobile.

6. After opening its ad platform to worldwide advertisers last year, Instagram has emerged as an important cash cow for Facebook. Again, there were no exact numbers with regard to contribution from Instagram. It has expanded Dynamic ads to Instagram while adding features like Live and Boomerang to Stories.

7. Messenger, WhatsApp and Oculus are the other extremely prized possessions. Facebook is aggressively working on monetizing the opportunities presented by its subsidiaries. Chatbots and “conversational commerce” are likely to be the strategies for Messenger and WhatsApp.

8. Facebook has a strong balance sheet and generates significant cash flow, which makes it an attractive stock for investors. The company has cash and cash equivalents of $41.71 billion and recorded robust cash flow from operations of over $7.67 billion in the fourth-quarter of 2017. Free cash flow amounted to nearly $5.41 billion.

9. The company’s user base continues to grow at a significant pace driven by new features and tools that improve engagement. However, as developed regions mature, Facebook has taken measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.

10. FB stock price ($124.95) is at the 52-week low. Perhaps now is a good time to buy?

11. FB quarterly revenue growth was 32.90%, higher than the industry and sector average revenue growth (9.60% and 5.17%, respectively).

12. FB profitability is improving. The YoY profit margin change was 2.30pp.

13. FB average analyst rating is Strong Buy.

14. FB average analyst price target ($190.66) is above its current price ($124.95).

Here are FB stock sell reasons/signals:

1. Facebook is currently a one-trick pony and will be affected severely if online advertising no longer grows or if more advertising dollars shift to others like Google or Snapchat.

2. Despite rapid user growth, many of Facebook’s customers may also belong to other social networks, such as Snapchat, so the firm will continually have to fight to capture a user’s time and engagement with Facebook’s properties.

3. Regulations could emerge that limit the application and collection of user and usage data, which could minimize the value of Facebook’s aggregated data.

4. Facebook maintains a cautious stance on revenue growth. The last reported quarter was no different. Since the past few quarters, the company has maintained that ad revenues will continue to grow but will now face tougher year-over-year comparisons.

5. Although Facebook has significant growth opportunities in the emerging countries of South-East Asia and Africa, low internet penetration in these regions may negatively affect its expansion. Further, while the company can be accessed from Hong Kong, its usage has been restricted in mainland China due to excessive government regulations and censorship. This limits its growth opportunities in the Asian region (Facebook’s fastest growing user base in terms of geography).

6. As Facebook hosts a huge amount of personal data, it has been under constant scrutiny from privacy groups and federal agencies. This huge database is its primary asset for attracting advertisers. As a result, the company has been criticized for allegedly selling personal data to advertisers in order to boost its top line.

7. Facebook will likely be impacted because of the uncertainties relating to Brexit, given the fact that it will have to re-define everything from tax to data flow and privacy regulations for its operation in the U.K. Moreover, the company has its EU headquarters in Ireland, through which, it was getting certain tax benefits. Now due to Brexit, Facebook will have to chalk out a way to avoid paying higher taxes.

8. FB Price/Book ratio is 5.15, and it’s high compared to its industry peers’ P/B ratios.

9. FB Price/Sales ratio is 7.98, and it’s high compared to its industry peers’ P/S ratios.

What are your thoughts on FB?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


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