Nothing seems able to stop Facebook Inc. (NASDAQ:FB) stock, except perhaps Facebook. Still FB stock is a good stock to own.
Despite being pounded by what’s left of the print media, with Vanity Fair claiming it’s in a “downward spiral” and The Guardian claiming it has become addicted to “trivia,” , the company and its stock seem unsinkable, up 7.3% in less than a month.
When it reports earnings Jan. 31, analysts are expecting FB stock to report $1.94 per share of net income, while optimists whisper about $2.05, on revenues of $12.56 billion.
Such a performance, nearly doubling the earnings of the March quarter, with nearly twice the revenue of a year ago, and profit margins of nearly 50%, would lead most CEOs to pat themselves on the back and go fishing.
Not Mark Zuckerberg. Instead he wants the company fixed.
Leave Mark Zuckerberg Alone
For 2019, Zuckerberg writes (on Facebook of course) that he wants less public “news,” more private “moments,” a service more like WeChat from TenCent Holdings Ltd. (OTCMKTS:TCEHY), which coincidentally seems to have little trouble from China’s government.
But the turn may have come too late. Facebook today is king of all media and FB stock reflects that. Along with Alphabet Inc. (NASDAQ:GOOGL), it dominates the advertising market, which journalists have depended upon for centuries. Publishers are reduced to begging for scraps.
The site’s “test” for editorial credibility turns out to be two questions. You ever hear of these guys? Trust them? I’m sure white supremacists have heard of Stormfront and trust it implicitly. Does that make it the same as the New York Times Co. (NYSE:NYT)? What if you trust Stormfront more than Facebook?
And what of new publishers – if you’re not already big in news you can’t get into the new Facebook “news” feed.
The survey seems to have only intensified criticism. Fake news is unstoppable, thunders Time. Facebook should be regulated like cigarettes, says Salesforce.com Inc. (NYSE:CRM) CEO Marc Benioff. AT&T Inc. (NYSE:T) CEO Randall Stephenson agrees, saying Facebook should face “net neutrality” rules (even while he doesn’t).
Oh, and this from News Corp. (NASDAQ:NWSA) executive chairman Rupert Murdoch. Pay us for hyperlinks.
Public-Financial Disconnect
The public debate over Facebook seems disconnected from the reality of its success or Facebook’s efforts to maintain that success. And FB stock has been wonderfully successful.
Facebook seems determined to overcome its image problems with technology. The company has bought Confirm, which authenticates user IDs.
It has rolled out new privacy rules ahead of the European Union’s General Data Protection Regulation. It has hired the scientist behind International Business Machines Corp. (NYSE:IBM) Watson AI engine.
There are Facebook and Wall Street on one hand, the media and politics on the other. FB stock was up to $190 in pre-market trading January 24, and with a market cap of $550 billion is up 49% over the last year.
The Bottom Line
Our James Brumley writes that you should not worry, be happy about Facebook. He compares it to a public park, where graffiti and crime are constants, and believes the company will prosper as it turns more toward e-commerce.
But everywhere Facebook turns, it’s on a collision course with someone bigger. Artificial intelligence is where Google is going, e-commerce is what Amazon.com Inc. (NASDAQ:AMZN) dominates, and media ownership is what Apple Inc. (NASDAQ:AAPL) seems to want.
You want to build software? You’re Microsoft Corp. (NASDAQ:MSFT).
All these companies are bigger, and more scaled, than Facebook. To get away from the posse of government and media, Facebook is going into a battle where, in every measurable way, it is outgunned.
I don’t like Facebook’s odds here. Feel free to disagree.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares of AMZN and MSFT.
