Facebook Stock Stands to Benefit as the World Embraces Its Apps

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Off the top of my head, it’s difficult to come up with a name shrouded in so much controversy over a short period of time like Facebook (NASDAQ:FB). Starting from the Cambridge Analytica scandal in the spring of 2018, the social media giant has faced privacy violation issues along with accusations of aiding housing discrimination. It’s enough to scare many folks out of Facebook stock.

Facebook Stock Stands to Benefit as the World Embraces Its Apps
Source: Ink Drop / Shutterstock.com

And yet, when looking at the charts, the company is one of the more resilient names in the markets. After suffering a badly disappointing year in 2018 — when it appeared that even the big man upstairs hated Facebook — the FB stock price rebounded convincingly last year, gaining 59%.

To put this into perspective, rival Twitter (NYSE:TWTR) only moved up 13% in 2019. Furthermore, the much-anticipated initial public offering of Pinterest (NYSE:PINS) ended last year with a whimper. It finished just underneath its IPO price of $19.

Comparatively, the main exception is Snap (NYSE:SNAP), which destroyed everyone in social media, skyrocketing 182%. However, it’s fair to point out that SNAP benefited from the law of small numbers.

Nevertheless, Facebook stock put up impressive numbers despite dominating the space in terms of active users. Now, the question remains if there’s more left in the tank for a credible run in 2020?

As a contrarian investor, I understand the hesitation regarding buying big blue chips that already scored strong returns. At best, the thinking goes, the good news is already priced in. At worst, shares could tumble. With the FB stock price no stranger to volatility, it’s a risky proposition.

Still, I believe the fundamental case for Facebook stock remains viable and here’s why.

Balanced Geographic Distribution a Plus for Facebook Stock

In my many stories covering FB stock, one of the consistent bullish arguments I’ve presented is practicality. Unlike other social media platforms that have a specific intent, Facebook is comparatively open source.

Typically, people use it as a communication channel with friends and family, especially if they live further away. But as you know, the company has evolved into myriad technological avenues. Combined with its massive base, users have other options available. For instance, it’s not uncommon to network professionally on the platform. As well, you can easily advertise your business or your non-profit venture.

On a similar note, Facebook is demographically agnostic. From young to old, the platform offers something for everyone. And this universal utility has helped drive FB stock in the past.

Moving forward, though, where the company will win is in the international space. Specifically, do other nations find Facebook as useful as we do? Overwhelmingly, the answer is yes.

Facebook active users geographic distribution
Click to Enlarge
Source: Chart by Josh Enomoto

In fact, one of the unique drivers for the FB stock price is that the U.S. market isn’t the underlying platform’s biggest market in terms of active users. (See chart at right) That title belongs to India with 269 million active users. The U.S. takes the silver medal with 183 million active users.

At first glance, that might injure our pride. But for the future trajectory of Facebook stock, you want robust, even dominant international usage. After all, 10 years from now, the global economic stage will look much different than it did 10 years prior. Thus, Facebook stock is demonstrating forward relevance today.

Not only that, the company has a very strong and balanced presence among emerging markets, or the economies of tomorrow. Again, this augurs well for the ultra-long-term case for FB stock.

No Real Challengers

To be fair, the more speculative bets like Twitter and especially Snap, feature far greater reward potential. Interestingly, though, these two platforms are mostly popular in the U.S., with their attractiveness declining rapidly in other countries.

Twitter active users geographic distribution
Click to Enlarge
Source: Chart by Josh Enomoto

For example, most of Twitter’s active users, or nearly 15%, are in the U.S. Next comes Japan, capturing almost 11% of all active users. From there, the active usage rates decline sharply among nations like Russia, the U.K., and Saudi Arabia. (See chart at right)

Then, you have Snap. (See chart below, right) Despite it winning young millennials and Generation Z, it’s mostly doing so in the U.S. In fact, Snap’s American active user base accounts for over 46% of all active users. And it’s a precipitous drop to second-place France, which has nearly 10% market share.

Snapchat active users geographic distribution
Click to Enlarge
Source: Chart by Josh Enomoto

Therefore, even though many have tried to challenge Facebook’s throne, nothing really comes close. More importantly, Facebook has its eyes on the international market and its making serious strides. This puts FB stock well ahead going into social media’s next phase.

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

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2020/01/facebook-stock-stands-to-benefit-as-the-world-embraces-its-apps/.

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