Posts Tagged ‘Facebook’

After trading sideway for a few weeks — while the rest of the market was going up — Facebook (FB) started its end-of-quarter / ramp-to-earnings run last week… hitting a high of almost 172 just a few days ago.

Things tried to knock the stock backwards.  Earlier in the week some key execs left the company and FB open sharply down, only to rally back even stronger.

And on Friday news of a data breech hit, again hitting the stock hard.  While it hasn’t rallied back yet, it did close nicely off its lows.

My take on these seemingly bad news events?

Zuckerberg and Sandberg don’t lose people they don’t want to lose.  If some execs exited, there was probably a good business reason for it.

And, while a data breach is always concerning, it was only a small % of actual Facebook users and dealt with demographic-type of info — available in lots of places — nothing even close to sensitive passwords or credit card-type info.

The breach was so benign, security experts say there is no need to even change your password (about 1:30 into the linked video).  THAT’S about as benign as it gets.

On the flip side, Facebook says they think they jumped on it fast enough to stop anything from even happening… so in a race between companies and hackers, FB’s response time — including disclosing the problem — seems to have been outstanding… exactly the kind of response the government has been looking for.

So, this is the kind of bad news that I think presents a good buying opportunity.

With this said, I do think there’s a good chance FB will see some more weakness based on bad news circulating in the press this weekend.  However, I’m less worried about that downside risk than I am about missing the next leg up… because I believe there’s a better chance big money investors will find FB’s suppressed stock price irresistible going into earnings over the next few weeks.  In fact, the action over the last few weeks suggests they’ve already started to pile in.

Please remember that it was just a scarce few months ago FB was trading at 218 on its way to the 240 level.  At Friday’s close of 164 and change, FB is now trading at crashed levels.  And this is for a company that thoroughly dominates their space… with about the best financials on the planet.

Also, please remember that FB’s earnings last quarter were actually pretty good… they beat MONSTER expectations, which was no easy feat.

What tanked the stock was ultra, ultra conservative guidance… which is the way Wall Street says a big earnings beat could be in the making… which sounds like a good news thing to me.

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Facebook has a lot going for it.  But one of its glaring weakness over the years is ZERO penetration into China.

Turns out dictatorships don’t like things like free speech.

Ironically, as much as FB gets slammed for privacy concerns, Facebook defiantly stood up to the Chinese government in 2009 when the Chinese demanded the release of private information from the company.

This was no small act:  For their privacy stance, the Chinese government blocked Facebook into the world’s most populous country… essentially halving their business opportunity.

THAT’S putting your money where your mouth is.

But, in a weird twist of fate, when many companies are getting slammed for the earnings impact of a US-China trade war, this isn’t an investment risk for Facebook… because they have no Chinese exposure.

And — it gets better — one of the expected outcomes of the trade war is a more level playing field, which (you guessed it) may mean Facebook becomes unblocked. 

If that happens, that could be a massive growth driver for FB earnings over the next few years.

Yet another reason why this trade war isn’t all bad.

Mark Zuckerberg, CEO and chairman of Facebook, just posted a good piece about this whole “data scandal.”

Not only does it appear that Facebook plugged up holes in their system years ago — as in, Facebook is not asleep-at-the-wheel…

… but Cambridge Analytica, the company accused of abusing the data, is categorically denying that any data was even used.

So it will be nice to find out the real story here.

With this said, the market is all about valuing in today what it thinks will happen tomorrow.

And in that regard, I think the market has overreacted about Facebook.

Because, regardless of what is actually discovered, the most likely fallout will simply be greater regulatory scrutiny… but not just affecting Facebook, but all ad platforms… and, in fact, all advertisers… which is essentially the entire business complex on the planet.

And, practically speaking, if something affects everyone, will it really affect anyone?

Businesses will still have to advertise.  Facebook will still control over 2 billion sets of eyeballs.  Unless we see a mass exodus from Facebook properties (Facebook, Instagram, WhatsApp, Oculus VR, etc), Facebook will still be raking in a lion’s share of ad dollars from advertisers desperate for any kind of targeting.

Honestly, I believe Facebook has more to fear from the changing generational preferences in sharing tools — as in, my friends use Facebook but their kids don’t — than they do from the government.

I’m still trying to figure out all this Facebook stuff.

Seems like everyone’s trying to figure out if whatever happened really did sway elections and destroy the democratic process as we know it.

Well, if it did, I guess no one cared when Obama and the democrats used Facebook data to help them win elections.

I’m just sayin’.

P.S.  If Putin did try to use social media to sway our elections, I wonder how he’s feeling about that now?  My guess is he’s probably thinking Hillary would have been a lot more predictable than Trump.  Good luck, Emperor Putin, trying to negotiate with a 4th grader!

Everyone thinks Facebook flopped in the public market.

Worse, that this might affect funding and public offerings for a rash of other tech companies.

Huh?

Facebook skyrocketed in the public markets… going from $0 to over $50 billion in market capitalization in less than a decade.

If anything, that should encourage future tech investment, not discourage it.

The problems everyone is having is where that value was created.

It was created on a new innovation — “private exchange” markets where people can publicly buy and sell shares in private companies…

… which means Facebook has been public for a LONG time…

… and it means Facebook was the first company in history to have its share price run-up BEFORE it hit the well established public exchanges.

If anything, THAT should be the headline in all of this… liquidity is now available for private corporations before traditional liquidity events.

P.S.  As to Facebook share price… at 10x sales and 50x profits, Facebook is already trading like a mature company.  That means it’s probably going to hang around the 20’s for a while.