Facebook: Sinking Ship or Not?

To start off, I'm long-term bullish on Facebook. I think they're a well-positioned company with lean operations, good cash reserves, low debt. There's obviously a lot of controversy around the company recently and there are good reasons for that. However, I think they're finally being forced to address these, which should ultimately be good for business.

The current drop of Facebook was extremely exaggerated in my personal opinion. The drop in users was 1 million out of… 1.93 BILLION. Less than 0.05% loss of users! That also comes after a pandemic boost so, even though it's not a great sight, it's not as bad as people make it out to be.

Plus, the main reason why Facebook missed earnings was due to their investments in Reality Labs, e.g. their AR and VR branch. Facebook's core business actually grew and we can also see that in their revenue which is up 20% YoY. Does it make sense to punish the stock for trying to get ahead of the market in a brand new sector? It makes no sense. IIRC, AR and VR are meant to be a $300 bln market within 10 years or so. Facebook is one of the pioneers there along with other mega-cap tech giants. The revenue and earnings potential there is absolutely massive so it would make sense for FB to try to spearhead it as much as possible.

I'm not a fan of Zuck and co., but I think we have to admit they've built something phenomenal (although frightening). It's a solid business and trading at a PE of 17 is crazy IMO. How many other companies at that PE ratio seen revenue growth of 20%? I mean, Coca Cola has a PE of 30!

Long story short, I'm long-term bullish although seeing how the markets reacted, I can't see Facebook hitting $300 again in the next 3 months, possibly 6 to 12 months. However, I think it's a good time for anyone to add to their position which is what I'm doing (although I only own something like 1.2 shares of FB right now).


Leave a Reply

Your email address will not be published. Required fields are marked *