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Facebook's Resilience Is An Important Reason To Own It Here
- Facebook's shares have held ground through December's swoon as the Nasdaq and Apple have fallen significantly.
- We now know where true support is for Facebook shares, so I view it as a safe bet for rattled investors here.
- On a valuation basis, I continue to be astounded by what I see as a conservative estimate for at least 36% average annual appreciation in FB over the long term.
Will Millennials Eventually Grow Into Facebook Users?
- In my prior article, SA readers asked, do teenage Snapchat users become Facebook users as they become adults?
- Yes, because Facebook becomes a personal blog, and gives users the ability to stay connected with people across broader demographics.
- These features are vastly more important to an 18+ demographic, and cannot be replicated by Snapchat, as its features are targeted at younger users.
- Instagram has surpassed 300 million monthly active users.
- Efforts to monetize the mobile app supports Facebook's earnings and revenue growth going forward.
- The company is relatively well-diversified, as it's not dependent on any single mobile application.
- Facebook's growth prospects, trends in profitability and competitive dynamics support my buy thesis on the stock.
- Facebook has lost the teenage demographic as many young users spend time on Snapchat or Instagram.
- Snapchat has a more functional user interface when interacting with content that's presented in a blog reel.
- This puts Facebook in a questionable position as the core design of the news feed doesn't appeal to a key sub segment of users.
- The vast majority of the internet population are still on Facebook, so it's not like the loss of a core demographic hurts Facebook's financial prospects by much.
- Facebook remains a strong investment, but developments in this space need to be watched closely.
Instagram Beats Twitter With 300 Million Active Users
China Reaches Out To Facebook In Growing Courtship
- LinkedIn shares continue to look attractive despite their high P/E ratio.
- LinkedIn is well positioned to benefit from achieving pricing power with its members.
- Facebook stock performance is expected to lag LinkedIn's performance.
- Facebook has developed methods to keep capital costs down.
- This translates into improved profitability.
- Facebook's management team also has other cost levers to meet quarterly earnings targets.
- For those reasons, the long-term growth rate looks relatively attainable.
- Turning Virtual Reality into Virtual Profits.
- Most investors still don’t understand what Facebook’s new product even is, and therefore have no idea of what the promise or the potential are.
- Every market that will generate income, previously existed, but will now be expanded and tapped with an iTunes efficiency.
- This article is an introduction and primer on the possibilities.
- Focusing on advertising metrics such as CPCs (cost per clicks) and CTRs (click-through rates) doesn't tell investors a lot about relative performance of the Internet giants.
- Google's CPCs have tanked, while Facebook's are increasing steadily. This doesn't indicate that Facebook is winning. It simply reflects differences in mobile maturity. Expect CPCs to stabilize for both.
- CTRs, on the other hand, are rising across the board. Clumsy fingers on mobile devices are driving this, and these are likely to stay elevated.
- Revenues will follow eyeballs in digital advertising. Pricing and CTRs are interesting footnotes, but aren't the driving force of either Google's or Facebook's revenue growth.
- FB is suitable for the Enterprising Investor following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is overvalued at the present time.
- The market is implying a 44.04% earnings growth over the next 7-10 years, which is not sustainable over such a long period of time.
- Facebook is currently developing a separate application for work-oriented purposes.
- Facebook at Work may drive productivity gains, despite the controversy surrounding privacy and socialization in the workforce.
- Even if Facebook at Work doesn't become a huge success, the cost will be minimal and the company will learn from the experience and move on.
- Facebook is continuously trying to locate emerging revenue streams to lower its dependency on ad sales and generate revenues outside of its core business.
- Facebook targets the corporate market for non-ad revenues by offering professional services in its new professional social network and internal corporate communication application.
- Facebook has the knowledge to execute these two initiatives successfully and grow its non-ad revenues from adjustment markets to its core business.
- Facebook is testing a separately hosted version of its site for use at work.
- The potential move is misunderstood by some as a direct attack on LinkedIn.
- Facebook At Work is simply a move to increase the amount of time users spend on its core product each day.
Facebook: Rumored To Encroach Into LinkedIn's Territory - Will It Acquire To Do So?
- Facebook has been rumored to be developing a professional site that would present a threat to LinkedIn.
- The rumor appears to have some credence and fit into management's guidance for expenses to rise between 50% and 75% next year.
- Facebook has a history of acquiring companies and integrating their technology into their new platform and there is a possible target for Facebook to create a LNKD competitor.
- Facebook has altered its news feed and both users and shareholders will benefit.
- The vast gap between the number of business pages and those pages that pay for ads will quickly close.
- There is plenty of room for ad prices to increase while still delivering superior ROIs for advertisers.
What's Inside Facebook's Oculus Rift? Investment Opportunity
- Facebook has a vision for virtual reality, and will likely be aggressive in throwing development and investment dollars into the industry.
- The VR market is estimated to become a $7 billion industry by 2018 with Facebook set up to be a dominant player for the hardware and content.
- I agree with Mark Zuckerberg's view of VR's future marketability, but the critics of the early-stage technology are correct. New components will be built with corresponding investment needed.
- Facebook's Oculus Rift is due to be released to the broad consumer market some time in 2015 alongside other VR devices within the next year.
- Sophic Capital has identified several companies that build components of the Rift which will benefit from the consumer release and as new generations of the product are developed.
Facebook Is Undervalued Based On The Company's Growth Outlook
- Facebook's growth is extraordinary, in the last quarter revenues are up 59%, user numbers are still growing at a double digit pace.
- Facebook's fundamentals look good: High (and growing) margins and returns on capital, no debt.
- Facebook's earnings multiple is at an all time low.
- The Graham formula suggests that Facebook is trading at a discount to its intrinsic value right now.
- The DCF method suggests that Facebook is undervalued if the long term EPS growth rate exceeds 5% annually.
Fri, Oct. 3, 7:26 AM
- Unconditional approval of the $19B deal is not unexpected.
- "The [Europena] Commission found that Facebook (NASDAQ:FB) Messenger and WhatsApp are not close competitors and that consumers would continue to have a wide choice of alternative consumer communications apps after the transaction."
- Commission Vice President in charge of competition policy Joaquin Alumina: "While Facebook Messenger and WhatsApp are two of the most popular apps, most people use more than one communications app."
- Shares +0.6% premarket
- Previously: Facebook plans entry into healthcare
Fri, Oct. 3, 3:32 AM
- Following on the heels of Apple and Google, Facebook (NASDAQ:FB) is planning its entry into the field of healthcare, Reuters reports.
- The company is exploring several areas, such as creating online "support communities" that would connect users suffering from various ailments, and new "preventative care" applications that would help people improve their lifestyles.
- Sources say that Facebook has been holding meetings with medical industry experts and entrepreneurs, and is setting up a R&D unit to test new health apps.
Mon, Sep. 29, 11:45 AM
- Facebook (FB +0.2%) has officially launched an overhauled version of its Atlas ad-measurement/serving platform. As previously reported, the revamped Atlas uses Facebook profile info to allow advertisers to track the performance of Facebook and non-Facebook ads, and (leveraging Facebook data) also allows them to make automated ad buys for inventory on 3rd-party sites/apps.
- Instagram and ad giant Omnicom are among the first supporters. Marin Software (MRIN -0.3%) is among the ad tech supporters - its platform will be integrated with Atlas to allow clients to better measure their ROI on search ad campaigns.
- Interestingly, Re/code reports hearing Facebook has "talked to Twitter" about supporting Atlas. The site adds some think Facebook's main goal with the platform is to leverage the data it obtains about 3rd-party ad sales to improve the effectiveness of its internal ad sales.
- Instagram has been blocked in China as protests erupt in Hong Kong. Until now, the photo-sharing platform has been available in China even as Facebook's core services are generally blocked. Many Chinese celebrities claim 100K+ Instagram followers.
- Ello, a new social network that pitches itself as the anti-Facebook - it refuses to sell ads, and plans to monetize by charging for value-added features - has been quickly gaining users. According to one estimate, over 35K people have been asking to sign up per hour.
- With Facebook claiming 1.32B MAUs at the end of Q2 (204M in North America), its network effect remains a big hurdle for Ello and other would-be rivals.
Thu, Sep. 25, 1:22 PM
- Reuters reports the EU is set to unconditionally approve Facebook's (FB -0.5%) purchase of WhatsApp. The EU previously set an Oct. 3 deadline for its decision.
- In spite of the partial overlap between WhatsApp and Facebook Messenger, regulatory approval has been widely expected, given competition from Line, Kakao, BlackBerry, Apple, Skype, and many others. Thanks to the rally in Facebook shares, the deal is now worth $22B ($18B in stock, $4B in cash).
- Stifel's Scott Devitt (formerly at Morgan Stanley) has raised his Facebook target by $4 to $99 (a new Street high), citing the potential for rapid video ad growth. Devitt notes global digital video ad spend has been forecast to post a 29% CAGR from 2013-2018 (growing to $21.6B), and thinks Facebook can deliver 2016 video ad sales of $346M.
- With usage boosted by Facebook's new (and controversial) requirement for mobile Messenger users to download a standalone app, GlobalWebIndex estimates the Messenger apps are now used by 38% of its tracked global audience.
- Penetration rates are especially high in several major emerging markets, some of which are also big WhatsApp markets. India is at 57%, the Philippines at 59%, Mexico at 51%, and Brazil at 46%. U.K. penetration is estimated to have risen to 40% from 27% at the end of 2013. Facebook claimed 200M+ Messenger app active users back in April.
Tue, Sep. 23, 5:13 PM
- More than 18 months after buying Microsoft's Atlas ad measurement/serving platform, Facebook (FB +1.8%) is about to launch a revamped version of Atlas that will allow advertisers to measure the performance of ads seen and/or clicked on by Facebook users both on Facebook and (notably) 3rd-paty sites and apps.
- By anonymously linking ad measurement to Facebook profiles, Facebook aims to once more leverage its user data for ad targeting (previous), and provide better tracking across PCs and mobile than is possible via cookies. Atlas will also feature a programmatic (automated) ad-buying interface for marketers.
- As The Information reported last month, Facebook aims to use a revamped Atlas, its mobile ad network, and LiveRail's video ad platform (together with its data) to offer a full ad tech "stack" that can challenge Google's (GOOG -1.1%) huge DoubleClick display ad unit for the dollars of marketers buying ad inventory on 3rd-party sites/apps.
- Naturally, Google hasn't been standing idly either. The company bought ad measurement platform Adometry last spring, and has been working on tools to better track cross-device and offline activity. The company has also launched an app install ad service (competes against Facebook's very popular offering) for AdWords search ads.
Sat, Sep. 20, 4:48 PM
- Though plenty of ink has been spilled over Facebook's (NASDAQ:FB) competitive threats over the last year, eMarketer estimates the average U.S. Facebook user now spends 39 minutes/day on its site and apps - up from 38 in 2013 and 35 in 2012. The figures exclude Instagram, whose user base has a large U.S. component, and also WhatsApp.
- In spite of the usage growth, Facebook's share of U.S. social media time has fallen to 33.3% from a 2011 peak of 40%. Likewise, its share of U.S. digital time spent has slipped to 6% from 6.5%. On the other hand, with digital continuing to grab media share, Facebook's share of total media time spent has grown to 2.8% from 2.2%.
- Meanwhile, with Facebook's ad sales having soared over the last two years thanks to an all-out monetization push (especially on mobile), eMarketer estimates the company now has a 9.7% share of U.S. digital ad spend, 370 bps above its digital time share. By contrast, all other social networks claim just a 3.9% share of U.S. digital ad spend, in spite of having an 11.9% share of time spent.
- Likewise, Pandora (NYSE:P) is estimated to have only a 1.4% digital ad spend share vs. a 7.1% share of time spent. With the company spending aggressively to grow its ad salesforce, that gap could narrow in the coming years.
- As is the case for many of its peers, the U.S. remains crucial to Facebook's top and bottom lines: North America still accounted for 44% of Q2 revenue, even though it was responsible for only 15% of MAUs.
- Previous: Pew's U.S. Facebook survey data
Fri, Sep. 12, 10:53 AM
- Facebook (FB -0.3%) reportedly has reached out to some of YouTube's (GOOG -0.7%) top content producers and encouraged them to test distributing their videos on the social network, in another signal that it wants to muscle in on the video site.
- Content creators now use Facebook to promote their programming but prefer people to watch the videos on YouTube and other platforms where they can make money through ad sales more easily.
- FB and the video content creators are discussing how advertising might be incorporated into these videos, and some sort of ad product likely will be rolled out by the end of the year, WSJ reports.
Thu, Sep. 11, 7:08 PM
- After moving back above the $100/share level, Apple (NASDAQ:AAPL) is back over the $600B mark in market cap, pushing it nearly $200B above Exxon Mobil (NYSE:XOM), the next largest company in the U.S.
- XOM is still valued at more than $400B, but Google (NASDAQ:GOOG) at $397B and Microsoft (NASDAQ:MSFT) - which has surged in 2014, adding $74B in market cap to $386B - are closing the gap.
- Berkshire Hathaway (NYSE:BRK.B) completes the top five with a $339B market cap; no other companies are worth more than $300B.
- Rounding out the top 20 market caps: JNJ, WFC, GE, WMT, CVX, PG, JPM, FB, VZ, IBM, PFE, KO, ORCL, T, MRK.
Wed, Sep. 3, 11:52 AM
- The Gear VR, long rumored to be in the pipeline, relies on Samsung's (OTC:SSNLF, OTC:SSNGY) just-announced Galaxy Note 4 to run Oculus VR's (FB -1.1%) software, and provide the device's display and sensors. For now, no other phones work with the device.
- Unlike the gaming-focused Oculus Rift (still in beta), the Gear VR doesn't need a wired connection to a PC. Users interact with the headset through a trackpad and head movements. No price details have been given yet.
- Initial testers are intrigued by the Gear VR's potential, but are also quick to point out content/game support and software/UI development are still very much works in progress. Samsung/Oculus promise a content store will soon be available, and note initial content partners include DreamWorks, Warner Bros., Fox, and Marvel.
- Facebook was recently reported to be working with Hollywood on Oculus deals. Meanwhile, Oculus CEO Brendan Iribe has made it clear he considers OEM deals crucial to his firm's efforts to drive mass adoption of its platform, which has a solid head-start on rivals from a software standpoint. Competition will be provided by Sony's Morpheus headset and Google's Cardboard Android VR platform.
Tue, Sep. 2, 1:53 AM
- EU regulators are now soliciting feedback from Facebook's rivals and telecoms operators, after setting an Oct. 3 deadline to decide whether to clear Facebook's (NASDAQ:FB) $19B offer for WhatsApp.
- In a questionnaire sent to third parties, the EU competition watchdog asked if the deal would have a negative, neutral or positive impact on users of mobile messaging and social networks.
- U.S. regulators already gave the deal a green light in April.
Mon, Sep. 1, 6:30 AM
- EU antitrust authorities will decide whether to clear Facebook's (NASDAQ:FB) $19B offer for WhatsApp by Oct. 3.
- U.S. regulators have already cleared the takeover in April, provided WhatsApp sticks to its current privacy practices after the merger, including not to use users' personal data for targeted ads.
Wed, Aug. 27, 9:23 AM
- Citing valuation and expectations of slower 2015 growth, Janney's Tony Wible has downgraded Facebook (NASDAQ:FB) to Neutral. His target remains at $82.50.
- Wible launched coverage on Facebook at Buy a year ago, when shares were at $37.81. Like others, he remains upbeat about new monetization opportunities (Instagram, video ads, etc.).
- Facebook goes for 37x 2015E EPS. Estimates have steadily risen thanks to a string of earnings beats.The 2014 revenue growth consensus is at 55.6%, and the 2015 consensus at 34.4%.
- Shares -0.9% premarket.
Mon, Aug. 25, 11:23 AM
- WhatsApp (FB +0.6%) now has over 600M monthly active users (MAUs), CEO Jan Koum declares. The mobile messaging leader had only topped 500M in April, and had 450M at the time the Facebook deal was announced in mid-February.
- Mark Zuckerberg has long been confident WhatsApp will eventually have over 1B users, and has even reportedly suggested WhatsApp could eventually have a bigger base than Facebook proper. Facebook claimed 1.32B MAUs at the end of Q2.
- Meanwhile, comScore estimates Facebook's core app had 115.4M U.S. unique visitors in June, 32M more than the second-most-popular U.S. app (YouTube) and good for a 72% penetration rate. Globally, Facebook had 1.07B mobile MAUs at the end of June.
- comScore estimates Instagram had 46.6M U.S. users (#8 overall), and Facebook Messenger 39.2M (#12). WhatsApp, often used as an SMS replacement abroad, didn't crack the top-25, as U.S. users continue relying heavily on the SMS services often bundled with their mobile plans.
- Not surprisingly, comScore's data also suggests core Facebook's U.S. base skews older, and Instagram's base skews younger. Whereas core Facebook accounts for 18.4% of the time spent on apps by U.S. users aged 35-54, it accounts for 14.8% among those aged 18-24. Whereas Instagram accounts for just 1.2% of the time spent by the former group, and 6.6% of the time spent by the latter.
Thu, Aug. 21, 2:36 PM
- Five months after striking its first major ad agency deal, Instagram (FB -0.2%) is offering advertisers the kind of analytics and campaign-management tools they're accustomed to having for campaigns on Facebook proper (or for that matter, Google or Twitter).
- A performance-tracking dashboard includes tabs for creating/previewing ads, tracking ad impressions/reach, and monitoring user engagement. Facebook has been taking a go-it-slow approach to monetizing Instagram's 200M+ users, even as many top brands gain huge followings on the photo/video-sharing platform.
- Separately, Facebook has launched analytics tools for its App Links platform, which allows links within apps (including ones found in Facebook ads) to open other apps. The tools, provided by Facebook's Parse app tool unit, allow developers to track clicks and return visits, among other things.
- Facebook mentioned in July App Links, adopted by the likes of Spotify, Hulu, and Vimeo, has enabled 1B+ links. Product manager Vijay Shankar notes their ability to improve mobile ad quality, which in turn can improve click rates/pricing. "Ads on mobile [have] a lot of catching up to do, and I think this can help with that."
Thu, Aug. 21, 11:43 AM
- Hedge funds are having a difficult time of it again this year, up 1% vs. a 7.5% gain for the S&P 500, according to Goldman Sachs, which crunched the numbers on 775 funds with $1.9T in AUM.
- Nevertheless, Goldman's list of 50 stocks which "matter most" to hedge funds has outperformed the S&P 500 on a quarterly basis 66% of the time since 2001. The stocks this quarter (posted in order of the number of funds in which a name is a top-10 holding):
- ACT, AAPL, FB, AGN, AAL, GM, TWC, AIG, MSFT, HTZ, CHTR, MU, WMB, LNG, C, DAL, HCA, APC, CBS, ALLY, GOOGL, APD, NRF, BAC, EBAY, LBTYK, PCLN, VRX, BIDU, DTV, DISH, DG, EQIX, MA, WAG, ARCP, GILD, LINTA, MON, FOXA, VC, AMZN, BRK.A, BRK.B, SUNE, CMCSA, JPM, MIC, CCI, HES, LAMR.
- A special call-out to Northstar Realty (NYSE:NRF), Visteon (NYSE:VC), SunEdison (NYSE:SUNE), Macquarie Infrastructure (NYSE:MIC), and Lamar Advertising (NASDAQ:LAMR) for making the list of hedge fund hotels despite their relatively tiny market caps.
Sun, Aug. 10, 4:34 PM
- The latest iOS version of Facebook Messenger, released after Facebook (NASDAQ:FB) began requiring users to download a standalone Messenger app to send IMs to Facebook friends, has a rating of just 1/5 stars on the App Store. Over its entire lifetime, the app still has a rating of 4/5 stars.
- Both Twitter and the reviews sections for the App Store/Google Play have been flooded with complaints about Facebook's requirement. "I absolutely refuse to download another app just so I can chat on Facebook with my phone," writes one irate reviewer, echoing a common sentiment. Also: revised privacy terms have sparked some criticism.
- Mark Zuckerberg has argued using a standalone Messenger app yields a better experience than using Messenger via the core Facebook app. Requiring a separate messaging app is part of a broader Facebook effort to provide a slew of apps optimized for specific services, and in doing so avoid being just one icon on an iOS/Android home screen.
- Zuck has also suggested Facebook plans to add payments support to Messenger, which now has 200M+ MAUs and is run by ex-PayPal chief David Marcus. Facebook was recently reported to be thinking of adding support for Uber's car-hailing service to Messenger.
- Meanwhile, Facebook's new Slingshot app, a would-be Snapchat rival that requires recipients of an ephemeral photo/video to reply with one of their own, has plummeted on App Store download charts. A few other recent Facebook products have met similar fates.
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