Facebook Stock: An Excellent Buy Despite the Dip

Posted On September 26, 2017 2:39 pm

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Facebook stock is trading in the red after the company started feeling the heat amid its alleged involvement in selling controversial political ads to the Russians during the 2016 US presidential election. The stock is also down due to Mark Zuckerberg’s announcement that he plans to sell up to 75 million shares of Facebook. But we believe the current dip is an excellent buying opportunity, as the company’s fundamentals remain strong.

Facebook-owned Instagram recently reached the 800 million user milestone. In the second quarter of this year, Facebook’s mobile ads revenue increased by a whopping 53% year over year. The company excels in monetizing its gigantic user base. Facebook has around 2 billion monthly active users.

Facebook Monthly Users
(Source: TechCrunch)

But it should be kept in mind that Facebook’s ad revenue growth is decelerating. In the first and second quarters of this year, Facebook warned investors that ads growth would be slower than expected.

But Facebook plans to re-boost its growth with video content. The company has also started monetizing WhatsApp, which has over 1.3 billion monthly active users.

Recently, Chaim Siegel of Elazar Advisors LLC said in a program that Facebook stock will double in the next 12 months. Siegel based his thesis on several factors. First, Facebook’s number of users grow about 17% every quarter on average, which is an incredible growth and beats all social media companies. He also said that Facebook ads pricing is increasing every quarter, while Google’s ads prices are coming down rapidly. Advertising pricing shows the costs advertisers are ready to pay to have their ads placed on the internet.  Lastly, Siegel noted that data is the Facebook’s biggest strength, as users put all of their data on their profiles, and advertisers love social platforms which give them access to user data and their interests.

Small businesses cannot imagine their existence without Facebook. According to a report, about 60 million small businesses have a Facebook page. Almost 40% Facebook users like or follow pages for special offers and updates. Nearly 32% of the total Facebook users interact with brands regularly. People don’t “interact” or engage with brands in the real world. Facebook has given businesses an ability to keep their customers in touch with them.

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