mercredi 21 mars 2018

What's going on with Facebook

Via my excellent Facebook page where nothing ever happens (, I've asked people about which specific topic they would like me to write something.

A guy suggested Facebook.

A timely suggestion isn't it?

In 1986, Billy Joel wrote a song about the actual events. That song was called "A Matter of Trust". That's a rightful title for what's happening with Facebook right now.

I've wrote about the fundamentals of Facebook before. It's really an exceptionnal company (high growth, good ROE, almost no debt, a total domination of it's sector and a relatively low beta). The only letdown is that it's a huge company. One of the biggest companies in the world. And growth is always trickier once you've reached a certain level.

But, trickier than that, Facebook is now accused by a lot of people of laxism about the protection of it's data (about the US election but also about other things as well). I really don't have a clue if the recent events are due to laxism or if it's just the result of bad circumstances. What I'm sure is that the company is now in a situation where Mark Zuckerberg will have to be in a defense position for a while. And the company will surely suffer from some lost of confidence by consumers.

Everybody will be looking for rats in the walls. I feel it's gonna be like for Donald Trump which is accused everyday of any little or big thing he's done in the past.

I don't like polemics with my stocks. It's almost always counter-productive and usually, things go bad or stall for a while.

That's what I feel about Facebook. I may be wrong. But experience has made me looking for quiet places instead of hot spots.

8 commentaires:

  1. Ce commentaire a été supprimé par l'auteur.


  2. I don't like Facebook. Oh, but I do have an account and I do spend some time on it. So why do I not like it? That would go beyond the scope of your post. When it comes to Facebook as an investment, I also don't like it because I see little interest from young generations. Parents are on it, so it isn't cool. Now I understand Instagram is also part of Facebook and is more popular with youth but I don't know... I feel like something new could easily disrupt the social media business.


  4. Facebook users are addicts...and facebook is not done figuring out ways to make more money. I'm happy to "gamble" and buy at these levels.
    For perspective, I give people the example of Arista Networks. Here's one of the great growth stocks out there. It has grown by an average of 52% ANNUALLY over the last five years. So, I look at their consensus earnings per share estimates for last year, this year and next year. This is what I get from yahoo finance:
    $5.61 > $6.92 > $8.25
    Arista Networks wants you to pay up for such growth. It goes for 33x next year earnings.
    Who can top such numbers? Well... Facebook:
    EPS for last year, this year and next year: $5.39 / $7.35 / $8.90
    That's better growth than Arista networks.
    And Facebook is going for 18.5 x next year earnings.

    I'm willing to bet that Facebook will have more expenses putting out these fires but it still seems like a good bet. If young people do not like Facebook, then there's Instagram (which they also own). If something else comes out, they'll probably buy them out if they are any real threat. Facebook buys a lot of companies.

    I tell people if they do not like Facebook at 19x next year earnings, they can always buy twitter at 50x next year earnings or they can buy snap and hope that snap does not lose another $3 Billion next year.

  5. I agree with Angelo and I keep hearing the "kids aren't using it" argument but its actually misleading. Its like focusing on one negative statistic but ignoring all the other positive statistics. Yes facebook usage in the US was down in the age group from 12 to 24. But it was still up overall.Monthly active usage from q4 2016 to q4 2017 was flat in the US/Canada, but grew more than expected in Europe, Asia Pacific, and the rest of the world.The stats posted on FB usage by youth was on US users, and one in the UK. They are ignoring the developing nations like India, which is actually the country with the most FB users. Not to mention FB usage in the 45 to 65+ range is growing considerably. Also keep in mind this age group is much more likely to spend money on products advertised on fb versus a good portion of the youth demographic that don't have money to spend.

    Long story short, just because FB usage is down in teens in Canada/US that does not mean that is true globally. Canada is a spec in the statistics of global FB usage. Also growth in other countries and the older demographics are still growing rapidly. Look at the numbers instead of listening to headlines that only give you one side of the story. FB is attractive here.

    1. The problem with the stock market is that it’s not only a question of numbers. Trust is very important too.

    2. Totally agree! My defense of FB's growth is fundamental. We have all seen what can happen to a good stock that gets some bad publicity. They sometimes never recover. I don't feel that will be the case for FB but we'll have to wait and see how things play out. I doubt the decline is over yet though.