The hits just keep coming for Facebook, Inc. (NASDAQ:FB). And we have already absorbed the impact of the initial Cambridge Analytics news, stocks, FB continues to be under fire. More recently, we heard that the data breach affected far more users than initially reported. The company deleted the private messages Mark Zuckerberg, who raises an eyebrow. Sheryl Sandberg revealed in an interview that some advertisers put the company on pause to see what happens with the scandal.
This all sounds like terrible news. And yet, shares of FB appears to be the bottom of $150/share, and it keeps well in the Wake of the punishment Friday sales on the market. What’s going on here? Why not the Bulls (like me) throwing in the towel on the shares of Facebook now?
Is Facebook Still Growing?
I started buying shares of FB in the low $160s and got a lot of criticism from commentators. Although there are several arguments that constantly occur, one reigns: “of course, Facebook has grown rapidly in the past, but what happens to the price of the shares after they cease to grow?”
This is an important question, if we are talking about the same thing, but in many cases we don’t. Facebook is increasing its average monthly users by about 10% per year in recent years. It is already experiencing growth almost disappear in some developed markets, and 18-and-under crowd. Facebook fatigue/saturation is a known risk factor for the stock FB for quite some time.
But the Facebook platform in a stall (almost one in three people on the planet, mind you) – it’s not a disaster. While Facebook grows its mouth to about 10%, grew revenues at a rate of 40%+ over the past five years, compounded. He did gain 45% in the last 12 months — at least before the scandal really started to beat.
The Monetization, Not The Number Of Users, Questions
Given the massive wave of publicity, but the real investor now needs to assume that Facebook will not gain more users of the network. But that would block the growth of income spigot?
The answer is a definitive no. This is because Facebook has key factors: the price of electricity. As one of two significant digital online advertising ecosystem, it has great influence in establishing rates for advertising. And he used it in recent quarters.
I remember a few years ago that Facebook hit the scandals associated with fake users and click farms? Advertisers claim that Facebook sells advertising space for “users”, which actually does not exist. In particular, the advertisers claimed that many of their paid-on view was of seemingly fake profiles in third world countries. Virtual experiment of Bi-bi-si a Bagel is a good demonstration of what happened.
In any case, Facebook was down on bot farms and fake users. The credibility of the platform has grown over time, advertisers have become increasingly pleased with their results, as Facebook took a step forward to strengthen the integrity of the site. That, along with impressive vision in mobile, to create preconditions for the explosive company Facebook and revenue growth.
This cleaning up the user base would allow the revenue growth of Facebook, so far ahead of its user growth. As advertisers have found increasing the efficiency of their action, they are willing to pay more to Facebook in the future for each show. Facebook has a good tilt in your bet on advertising, and its revenue per active user. It gives him margin for error, even if user growth slows or stops for a while. It also serves as a reminder that Facebook has overcome the alarming posts in the past.
Outcome Users: Probably Not So Bad
Above I suggested that the real investor is now model Facebook as a no-growth platform. Given the potential additional bits of scandalous information comes out, it’s better to be careful.
However, initial data seems to indicate that Facebook does not actually lose all that many users. One observer looked at the data Google trends search for “delete Facebook”. Interest has been hovering around 25 to Cambridge history analyst. She immediately jumped to 100 (indicating the maximum search volume for this query). However, the volume of the look is below 50 (less than twice normal) and continues to decline.
Similarly, according to analyst firm LikeFolio monitors the number of users, noting that they want to leave Facebook every day. Immediately after the scandal, pointed out rebounded 10 reaching 21 Mar. However, by the end of March, pointed leaves, then decreased to less than 2 times pre-scandal Tom. So, while a broader impact of the Cambridge event Analytics remains to be seen, while the signs indicate a brief drop-from users, not a mass Exodus.
Shares of FB verdict
When I last wrote about the joint FB, I started to be excited about the company as much as $165/share. Now, down to $160, a call to FB stock only grew stronger.
I know that headlines horrible. It feels like this political attack on will never end. And frankly, the leadership of Facebook deserves a good chunk of the blame for getting into this situation in the first place. They need to make a change, and quickly, to keep up the trust of both users and advertisers.
But at the end of the day, there are only two main options for advertisers. They need to go where the eyeballs, and either alphabet Inc. (Nasdaq:googl at) or Facebook. Make no mistake, it is unlikely that such Twitter Inc (NYSE Ticker:market) will be able to use — he sells user data, too, in the end. Facebook may still drive up prices is because it is able to generate sales. At the end of the day, which is not a political drama that is going to move in shares of Facebook. I expect a lot more volatility, but in the end, Facebook stock rises again.
At the time of this writing, the Author owns shares of FB and did not have positions in any of the other above-mentioned securities. You can contact him on Twitter @irbezek.