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Facebook: Concerns Overdone

Apr. 05, 2018 10:58 AM ETMeta Platforms, Inc. (META)49 Comments
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  • We have a unique take on Facebook's data "leak." We think it may actually be a positive development over the long haul.
  • Facebook is a rare company with tremendous competitive advantages, a huge net cash position on the balance sheet, and considerable free cash flow generating potential.
  • The company also seemingly has an open-ended opportunity from e-commerce to payment processing to movie streaming and beyond. It's hard to quantify these items in valuation.
  • We believe Facebook's best days are still ahead of it.

By The Valuentum Team

We're still huge fans of Facebook (FB), even after the Cambridge Analytica data scandal, "Facebook Can't Stop, Won't Stop." There are a few reasons why our views differ from that of the market, however. For starters, we're viewing the potential for increased data regulation across social media, and the Internet as a whole, as a long-term positive. The greater that consumers end up trusting companies with their data, the better, in our view. In some ways, under a long-enough time horizon, one might actually view the recent seemingly major setback at Facebook as a "good thing."

Furthermore, we like that the executive team at Facebook is taking things seriously, and we think they are working hard to make things "right," and in doing so, they are making things better for consumers along the way. We'd be speculating if any monetary settlement may happen as a result of the Cambridge Analytica data "scandal" or if there may be more bad news on the horizon, but the company's balance sheet can handle it, and we don't expect recent negative headline noise to derail Facebook's tremendous fundamental and cash-flow-based "story" either. Advertisers need Facebook. This much we know is true, and we doubt this will ever change.

Second, we've often taken exception to the areas of emphasis on Facebook's stock analysis, as sometimes most analytics put a microscope on underlying metrics such as daily or active users or other user engagement metrics. At the end of the day, any internal metric must translate to free cash flow generation and end up in the valuation equation. Said differently, it's hard to be disappointed in an underlying metric if the share price is below one's price target or fair value estimate, for example. There's sometimes a lot of inconsistencies in tech analysis, but this has been the case for a

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We offer subscriptions and exclusive newsletters. Visit our website at www.valuentum.com for more information. Valuentum is an independent investment research publisher, offering premium equity reports and dividend reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information. Please read our Disclaimer that applies to all articles published on Seeking Alpha: http://www.valuentum.com/categories/20110613. Follow us on Twitter: @Valuentum

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

FB is included in Valuentum's simulated Best Ideas Newsletter portfolio.

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