Buy Facebook shares in online advertising space, according to this investor


The company might be in the news these days for a bunch of interesting reasons, but the stock is definitely something you want to own, says Paul Harris on Facebook (Facebook stock quotes, charts, news, analysts, NASDAQ financial data: FB).

“Everyone knows Facebook, it has over 3 billion users. I think the large amount of data they collect is very valuable not only for advertising but for content, ”said Harris, partner at Harris Douglas Asset Management, speaking Thursday on BNN Bloomberg.

Facebook’s share price had a poor September, with the stock losing ten percent of its value. But overall, it’s always been a rising year for FB, with a 24% increase since the start of the year and a year 2020 where the stock has returned 33%.

That might not be much compared to some of the company’s FAANG friends who saw outsized gains last year and as evidenced by Google’s parent company Alphabet are up more than 50% for 2021.

And like Google, Facebook faces attacks of a regulatory and legal nature, where governments and groups around the world are trying to push companies out of their virtual monopolies in the online advertising space: its search engine ubiquitous in the case of Google and its various social media platforms in the case of Facebook.

Facebook is playing the skidless hockey defense again this week, answering questions from a U.S. Senate committee on its photo-sharing site Instagram. Through leaked internal documents, it emerged that Facebook had conducted research into Instagram’s impact on teens, boys and girls, finding the social media platform to be harmful to mental health and body image, as the company only recently suspended the launch of an Instagram for children under 13.

“We care deeply about the safety and security of people on our platform,” Antigone Davis, Facebook’s head of global security, said in response to questioning before a Senate commerce subcommittee on Thursday. “We take the issue very seriously … We have put in place several safeguards to create safe and age-appropriate experiences for people between the ages of 13 and 17. “

And on the other hand, Australia’s crackdown on social media was recently bolstered by a court ruling that online editors are legally responsible for comments posted on their articles, a move that has pushed the giant to CNN information to exclude Australians from access to its Facebook pages. The court ruling comes after Australia earlier this year began forcing social media companies to pay for links from their sites to news agencies.

But while Facebook remains the perennial target of a number of broader concerns, the business itself remains in great shape, according to Harris, who points to the incredible yet untapped potential of some of Facebook’s assets.

“I think Facebook is undervalued in the sense that they haven’t monetized WhatsApp or Instagram enough. I think they can really monetize those two things, ”Harris said. “I understand there are a lot of regulatory issues around Facebook, but I think they’ve dealt with a lot of these things.”

“It’s a company that has an EBIT margin of over 50 percent, it doesn’t trade in a large multiple and I think it’s a great opportunity to buy the business,” he said. .

“Advertising is evolving online. It’s not printed anymore, or in a very limited way, and I think Facebook is taking full advantage of that, with Alphabet, ”Harris said.

Facebook continues to grow its revenue and bottom line at a rapid pace. Last year, the company posted revenue of $ 28.072 billion, up 33% from the previous year, while net profit reached $ 11.219 billion, up 53% . EPS for the year was $ 3.88 per share, compared to $ 2.56 per share for 2019. (All figures are in US dollars.)

Facebook’s ability to monetize has been clearly demonstrated over the past quarter, including its most recent, the company’s second quarter delivered in July. There, daily active users were 1.91 billion for the month of June, up just 7% from the previous year, but revenue rose 56% year-on-year to $ 29.077 billion. and net income rose 101% to $ 10.394 billion. or $ 3.61 per share.

“In the third and fourth quarters of 2021, we expect the year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we move through periods of increasing growth. stronger. When we look at two-year growth to exclude the overlap impacts of the COVID-19 recovery, we expect total two-year revenue growth to decelerate slightly in the second half of 2021 compared to the growth rate of the second. quarter, ”Facebook said in its second quarter press release.

“We continue to expect an increase in ad targeting headwinds in 2021 due to regulatory and platform changes, including recent iOS updates, which are expected to have a greater impact on the market. third trimester versus second trimester. This is factored into our outlook, ”the company said.

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