Recently when I have a chat with my friend, he said Facebook seems surpassed by Tik Tok and is not popular any more. I said well, before you make a conclusion, let me show you some research I have done… I’m an investor of Facebook, and I plan to increase my position when the price drop below $170 again, and here are the 3 reasons I invest in Facebook:
1. Huge user base and high growth potential;
2. A variety of product and is profitable;
3. Stock Price lower because of the current corona situation
I’m going to illustrate these 3 reasons in details below:
First, let’s take a look at the company business, user base and competitive landscape.
So from the 10-K report from SEC, Facebook currently has a variety of business: Facebook App, Instagram, Messenger, WhatsApp and Oculus, and the company make profit mainly from advertising (98.53%).
With more than 2 billion users of their products (Facebook, Instagram, WhatsApp…), Facebook is the leader in the social media industry. Facebook uses AI to analyze the huge user data and make accurate advertising recommendations to users. And also because of these targeted marketing and profitability of the users, the attractiveness of Facebook platforms is huge.
From the above chart from eMarketer, we can see that although the average time spend by users in US on FB is decreasing, the time spending on Instagram is increasing. The more time spend on the platforms, the more chanced user will see advertisements and sponsored contents, which help Facebook monetize their user base.
On average, one user in north America generate $41.41 in 2019 Q4, and the number has been raising in the past 3 years. That shows the company can turns the users into money and the profitability is keeping growing from year to year.
Next let’s look at the financial side. The company makes good money form advertising, and the revenue mainly comes from US and Europe. The company’s net income has been increasing from year to year, and the company holds a large amount of cash to survive even though recession.
Form technical perspective, I uslayy look at several indicators on to see whether it is a good time to buy, hold or sell. I’m using Smart Stock Screener App right now, it has a lot of technical indicators that you can check. From MACD I see that the stock price is in the increasing phase, which means the price will be higher later on. And when I look at RSI, it is 63.21 right now, very close to 70, so that means the stock is close to overbought, and the stock price should already be high. In my opinion, the stock price now is high may not be a good time to get in. I will hold my positions for now and if the stock price drop below $170 I will add more position. As a conservative mid and long term investor, I would estimate the stock price will be over $200 in one year and will sell some of my position at that time.
To sum up, Facebook to me is not just a great investment opportunity but also an icon to
Inspire me to embrace my thoughts and act on it. I want to share the old motto of Facebook “move fast and break things”, which is very inspiring to me. In my own experience sometimes I want to do a lot of things but I don’t have the courage to do it or because it’s risky, and then I missed the great opportunity. When I’m looking back I feel like regret not doing a lot of things when I’m younger. So now I feel like I want to seize the next opportunity I saw and make full of my life and take more risk when I’m still young.
Reference
1. Facebook 10-K report
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001326801/45290cc0-656d-4a88-a2f3-147c8de86506.pdf
2. Marketing Land https://marketingland.com/time-spent-on-facebook-snapchat-remains-flat-but-instagram-sees-growth-261705
3. Smart Stock Screener
https://apps.apple.com/us/app/smart-stock-screener/id1501485233
4. Yahoo Finance
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