Facebook (NASDAQ:FB) is no stranger to controversy. But even with data misuse with Cambridge Analytica, e-mails that allegedly linked Mark Zuckerberg to controversial privacy practices, and issues over its Libra cryptocurrency plans, Facebook stock has still managed to deliver, up 54% in 2019.
As the company was put under the microscope, hounded by fears of legal action in late 2018, Facebook emerged unscathed with many of its users and trajectory intact. Even with a $5 billion fine for privacy issues, business is on a roll, although stock has been range-bound for most of the year.
Facebook stock is still an attractive opportunity, long-term. However, before long, I expect for FB stock to resume its uptrend, and potentially retest $216.
Facebook Fundamentals Still Firm
At the moment, Facebook has a user base of 2.38 billion people around the world. Of those, more than a billion are mobile-only users.
There are also nearly 1.5 billion active daily users. In addition, at one point, Facebook was adding up to 500,000 new users a day, or six new profiles every second.
Granted, it did lose some users with the Cambridge controversy, but it’s tough to ignore the fact Facebook remains one of the most influential companies of our time.
Plus, as Luke Lango pointed out:
“Facebook’s digital properties are sticky — consumers don’t just use them and like them, they need them and can’t go without them. Thus, usage and ad revenue growth for the foreseeable future will remain robust. That means Facebook will remain a 20%-plus revenue and profit grower for a long time.”
Of course, we’ll learn more about Facebook’s growth when it reports earnings on Oct. 30.
In its last quarter, Facebook beat on revenue and earnings estimates. Revenue came in at $16.89 billion, or 28% higher than the $13.23 billion posted a year earlier, according to Motley Fool contributor Beth McKenna. Adjusted EPS was up 14% year over year to $1.99 from $1.74.
Unfortunately, nervous investors sent the stock lower on those results over concerns over margins and the potential for regulatory action. There are also concerns that Facebook EPS and revenue growth will soon slow after such sizable growth. However, analysts don’t seem greatly concerned.
Analysts Say Facebook Stock Has More Upside
Ahead of third-quarter earnings, analysts are in Facebook’s corner.
In fact, according to Deutsche Bank’s Lloyd Walmsley, data says there weren’t any signs of advertising spending deceleration quarter over quarter.
“We expect solid 3Q results at Facebook with upside potential to our top-line projections for 3Q ad revs +29% ex-FX,” he added.
Deutsche Bank analysts have a buy rating on the stock.
Barclays’ analyst Ross Sandler notes:
“We get the sense that Facebook is starting to come out of the privacy and regulatory fog it has been in the past two years, and get back to a stronger innovation cycle. Management likely paints a scenario of steady deceleration and heavy investment for 2020, but we think Facebook may be the only mega-cap to see margin expansion and rapidly accelerating EPS growth next year.”
The Bottom Line on Facebook Stock
Controversy aside, it’s tough to argue against the long-term opportunity in Facebook.
While I’m not a fan of FB short-term, I do believe the long-term growth story is intact and strong with a growing user base. Of course, we’ll have a better idea of what’s going on when Facebook releases earning.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.