FB Stock Remains A Buy Despite Recent Drama

How bad will things get for Facebook (NASDAQ:FB)?

That’s the question investors and analysts are trying to answer coming off a very bad week for the social network. After a series of articles in The Wall Street Journal dubbed “The Facebook Files” detailed how the company encourages conflict and discord for it own profits, Facebook was then raked over the coals in a televised interview with Frances Haugen, a former product manager within the company turned whistleblower, that was broadcast on 60 Minutes.

someone using the Facebook (FB stock) app on their phone in front of a laptop that also has the Facebook webpage on it

Source: Chinnapong / Shutterstock.com

In the TV interview and subsequent appearance before a Senate Committee on Capital Hill, Haugen accused Facebook of putting profits ahead of public safety and said the company purposely encourages anger and conflict among users of the social media site as a means of keeping people engaged. To top it off, Haugen also filed multiple complaints about Facebook with the U.S. Securities and Exchange Commission (SEC) claiming that the company “mislead investors.” Amid it all, Facebook also endured one of the worst site crashes in the company’s history.

The public thrashing pushed FB stock down 5% over the past week, bringing its decline over the last month to 13%. At $328.18 per share, the company’s share price is now up only 5% over the past six months. With Congress seeming more determined than ever to bring in regulations to reign in Facebook and other social media giants, many people are wondering what the future holds for the company that was started by Mark Zuckerberg and a handful of friends out of a Harvard dorm room back in 2004?

Antitrust Actions

Even before the latest public rebuke, Facebook was facing aggressive antitrust actions in Washington, D.C. where lawmakers have had the company in their crosshairs for several years now. So far, the Menlo Park, California-based company has managed to fend off efforts to regulate or break-up its business. In June of this year, the company’s market capitalization surpassed $1 trillion for the first time after a federal judge dismissed two antitrust lawsuits against the company.

However, undaunted, the Federal Trade Commission (FTC) redoubled its antitrust action against Facebook in August, filing a new, revised complaint that is about 50% longer than the original one but essentially covers the same arguments alleging that the company engages in anticompetitive acquisitions and denies third-party apps access to Facebook’s platform in ways that stifle competition. Facebook petitioned a court in early October to toss out the latest FTC antitrust suit. And while the company may succeed, the desire by regulators and lawmakers to put Facebook under their thumb shows no signs of abating.

An Advertising Juggernaut

Despite its public grilling and the antitrust efforts levelled at it, Facebook remains a highly profitable business and one of the largest generators of advertising dollars on the Internet. The company’s profit in this year’s second quarter doubled from a year earlier to $10.4 billion, and its advertising revenue jumped 56% year-over-year as companies resume spending on consumer ads as the Covid-19 pandemic wanes.

While Facebook has warned that its growth could slow in this year’s second half, there’s no indication that the advertising dollars funneled towards it is slowing in a meaningful way. While there have been efforts aimed at encouraging companies to boycott Facebook and stop advertising on the social media platform, none of those efforts have had a significant impact on the company. Through ups and downs, advertisers have stuck by Facebook and its 2.89 billion monthly active users, which continues to make it the largest social media company on the planet.

FB Stock Can Weather The Storm

While there’s no question that Facebook has had a tough go of it over the past week, there’s every indication that the company can weather the storm and its stock can continue trending higher over the long-term. In addition to its marquee social media site, Facebook also owns other profitable brands such as Instagram and What’s App and has had success with its Oculus virtual reality headset. Add in the robust advertising spending and big profits and it becomes apparent that Facebook still has plenty of upside ahead of it.

While antitrust actions in Washington, D.C. remain an issue of concern, FB stock is likely resilient enough to continue providing shareholders with gains. The median price target on Facebook stock is currently $425.00 a share, suggesting a 30% increase from current levels. The high price target on the shares is $500. Given the underlying strength of its business, increasingly diverse operations, and massive user base, Facebook stock remains a buy.

Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Antitrust Actions

An Advertising Juggernaut

FB Stock Can Weather The Storm

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