Facebook (FB) continues to demonstrate its ever-expanding and massive moat in the social media space. Facebook’s core social media platform, in combination with its other properties such as Instagram and WhatsApp, continue to grow while expanding margins and unlocking revenue verticals. Despite being faced with several public relations challenges over the past couple of years (i.e., Cambridge Analytica, coordinated boycotts, government inquiries into privacy, jumbled earnings calls, and anti-competitive testimonies), Facebook has triumphed to all-times as of late. Facebook had to contend with scaled back advertising spending amid the COVID-19 pandemic in conjunction with the public relation issues. Facebook continues to grow across all business segments, with its user base continuing to expand slowly. Facebook’s moat is undeniable, and any meaningful sell-off like the recent Fed-induced systemic weakness could provide an entry point for the long-term investor. Although near all-time highs, Facebook is inexpensive relative to its technology cohort.
Advertising Boycotts Falter
Facebook faced a very public onslaught of companies joining an advertising boycott across its social media platforms. However, its latest earnings reports suggest that this effort may have been largely symbolic and effectively inconsequential to its revenue and growth numbers. The advertising boycott had grown to roughly a thousand groups and multinational companies. This presented a unique challenge in which the company remediated and diverted more spending to compliance/security aspects which had already swelled post-Cambridge Analytica, and other platform vulnerabilities were exposed. The magnitude of this boycott seems to have been an inconsequential influence on the stock price. This public relations challenge was managed and posed minimal risk to the company’s valuation moving forward. Continue reading "Facebook Is Inexpensive"