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Regulatory Issues Will Have Little Effect on Facebook Stock

Jamie Johnson

Facebook (NASDAQ:FB) saw its user privacy scandal finally come to a tepid conclusion last week. The company agreed to pay a $5 billion fine, the largest fine ever given by the Federal Trade Commission.

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FB also dealt with regulatory opposition over its plans to launch the cryptocurrency Libra. Both situations sound serious, but they will likely have little effect on Facebook’s stock going forward.

The tech company continues to grow and these regulatory issues will prove to be no more than a blip on its radar. Facebook’s shares are up more than 55% year-to-date and the company has made up for nearly all of its 2018 losses.

Here are three things to expect from FB stock in 2019.

Renewed Focus on Privacy

Facebook CEO Mark Zuckerberg recently announced that the company will focus on user privacy going forward. Facebook plans to merge its three major messaging platforms: WhatsApp, Messenger, and direct messaging on Instagram. 

When this happens, the company will utilize end-to-end encryption. This means your messages would be unreadable to anyone but you and the intended recipient. FB has also renewed its commitment to reduce data retention and to not store data indefinitely.  

FB Platform Will Focus on Groups

Over the years, Facebook has turned into more of a news source than anything else. But in line with the company’s shift to privacy, Facebook’s platform will be updated with a renewed focus on groups.

Facebook is redesigning both its mobile and desktop apps with new features that promote group communication instead of the traditional News Feed. The company also plans to make changes to Facebook stories and Marketplace. 

Facebook Will Diversify Revenue

The majority of Facebook’s $56 billion in annual revenue comes from advertising. But this will be harder to do if the platform shifts its focus onto messaging, groups, and Facebook Stories. 

It’s likely Facebook will diversify its revenue by integrating payment systems within its platform. The company has already started to move in this direction with the announcement of Libra. 

FB will make money off the cryptocurrency by offering a digital wallet called Calibra. However, this is a long-term venture as Facebook doesn’t plan to launch Libra until 2020. 

Final Thoughts

Many people expected Facebook to get hit with a big fine, but few people expected that the company’s shares would go up after. Not only do the company’s shareholders seem to care very little about its privacy issues but its users don’t seem to care that much either.

Were there users who jumped ship and left the platform altogether after the privacy issues came out? Sure, but they were probably in the minority. Facebook has over two billion monthly active users and adds 500,000 new users every day. 

Opinions are divided when it comes to Facebook, but the company seems to have an endless ability to rebound from trouble. Don’t let regulatory concerns keep you from investing in a long-term growth stock like FB. 

As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.

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