mardi 26 octobre 2021

Facebook valuation getting lower and lower

Usually, there's about 16.5 million Facebook shares changing hands every day.

Today, more than 65 million of Facebook shares changed hands. And the stock was down 4%.

Why? Because of various things, but mostly because of concerns related to Apple privacy changes. But even if privacy changes seem like a threat, Facebook EPS grew by 19% this last quarter. A growth of 19% for a 900 billion dollars company. 

While I don't think that Facebook is more virtuous than any other business, I believe that it remains an exceptional business with or without Apple privacy changes.

Because there's about 3 billion people using that social media every month. Just that information is like an uppercut. Do you imagine how much information they've collected since 2004? Even if Apple would put it's privacy at it's maximum level, do you realize how much Facebook knows us and knows how to approach consumers for any matter? Plus, they have so much money on hand (about 60 billion dollars) and almost no debt. They could buy any competitor. 

I'm not able to fully understand the impact of Apple privacy changes on Facebook's future earnings. However, I know that Facebook's valuation is pretty low (about 18 times next year's earning if we deduce cash on hand). Yes, 18 times next year's earnings for a company that has more data about you and I than any other company in the world. Plus, a company full of cash, without debt and with 36% profit margins. And with a ROE of 32. 

I defy anybody to find a stock with such margins, such ROE, such penetration all over the world and with such a valuation. 

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