Is It Finally Time to Start Buying Facebook Stock Again?
- By Jacob Maslow
Shares of Facebook Inc. (FB) were down 0.95% at market close on Tuesday, part of an ongoing downward trend for the social media giant's stock. Over the last year, shares have tumbled roughly 19%.
Some investors are questioning whether the stock has finally hit rock bottom, but as the press continues to unearth more bad decisions from Facebook, it's hard to see an end to this downward trend.
Warning! GuruFocus has detected 1 Warning Sign with FB. Click here to check it out.
The intrinsic value of FB
As a result, should you still be avoiding the stock, or is now the time to start buying again?
Many investors are still steering clear of the California-based company, claiming it's still too risky to jump back on board. Given that CEO Mark Zuckerberg is still holding back on selling his shares, it's easy to see why some aren't convinced the stock has bottomed out.
For those who don't know, Zuckerberg and his wife made a pledge in September 2017 to donate 99% of their wealth to charity. Zuckerberg has been selling large volumes of his shares every week to fund his charity, Chan Zuckerberg Initiative, but his weekly sales came to a halt when the company's shares tumbled.
Zuckerberg didn't sell a single share between October and December 2018, according to Bloomberg.
While discouraging, Facebook will likely find a way to recover. The stock is down 20% on the quarter, but Netflix (NFLX) and Amazon (AMZN) are down 34% and 28% respectively. While Facebook is projected to lose 3% of its market share over the next two years, Instagram is expected to grow its share by 2% over the same period. That growth could mitigate Facebook's potential losses thanks to the launch of Instagram Stories.
Young users are still highly engaged on Instagram. In 2017, the company said users under the age of 25 spend an average of 32 minutes per day on the social media platform. Instagram and Stories have only grown since then, from 250 million daily active users to 400 million as of June 2018. It's not surprising, then, that there's a high demand for advertisements on Stories.
Facebook, with the help of Instagram, can recover. Yes, July earnings were terrible, but October's earnings weren't so bad. If January's earnings are more impressive, we may start seeing the stock turn around or even return to its bullish ways. Until then, you may want to hold off a little bit longer before you start buying shares again.
Disclosure: The author has no stakes in the listed equities.
Read more here:
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 1 Warning Sign with FB. Click here to check it out.
The intrinsic value of FB
