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Facebook Has Probably Gone Most Of Its Way Down

Mar. 11, 2020 1:44 PM ETMeta Platforms, Inc. (META)55 Comments
Oleh Kombaiev profile picture
Oleh Kombaiev


  • From technical point of view, Facebook is critically undervalued at the moment.
  • The company is balanced in terms of its internal growth.
  • FB is clearly undervalued relative to the main blue chips in Nasdaq.

Facebook (FB) shares fell 30% from their all-time high, and this is a good moment to review the company's fundamental state.

1. Technical parameters

I’d like to start with the analysis of the long-term trend of Facebook stock price.

The entire history of Facebook’s stock price growth is well-described by the exponential trend which appears as a straight line on the graph with a logarithmic y-axis:

Facebook long-term trendAt the moment, the actual price of Facebook’s stock deviates from this trend by nearly 40% or by three standard deviations:

This is almost the maximum deviation since 2014:

The rolling annual total price return of Facebook's stock has dropped to the lower border of the standard deviation:

The rolling monthly total price return is much lower than its standard deviation:

All this, from technical point of view, indicates that Facebook is critically undervalued at the moment.

2. Growth drivers

The long-term relationship between the revenue TTM absolute size and Facebook's capitalization describes the company's current capitalization as clearly undervalued:

To a lesser extent, but the same is true for the long-term relationship between the EPS TTM absolute size and the company's capitalization:

Now, let's look at how the growth of Facebook's financial indicators relate to the current level of its multiples.

Speaking of the revenue, it should be noted that the current level of Facebook's capitalization, reflected by the P/S multiple, is balanced with the current pace of the revenue growth:

We reveal the same condition analyzing the interdependence between the growth rate of Facebook's EBITDA and the value of the EV/EBITDA over the past four years:

So, from the point of view of the established patterns, Facebook is undervalued in terms of the absolute values of the key financial indicators and balanced in terms of their growth rates. In other words, so far there is no

This article was written by

Oleh Kombaiev profile picture
Individual investor, data and financial analyst. I am interested in investment decisions based on objective methods of modeling and statistical analysis. Besides, I pay much attention to the psychological aspects of decision making.

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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (55)

as I said on 3/12, a buyer at $135. If not today will be starting in tomorrow. (can still go lower as well).
I am in but I see the potential to buy more shares at lower price if this continues, people are selling FB irrationally and just waiting for bottom to hit.
Ad dollars are going to skyrocket once the virus fades. Pent up demand and the need to lure customers back to travel, shop, dine will require tons of advertising. And this election year will be the most intense ever. $$$$$
Good comment. Long FB.
lol great timing for this headline.
The Clairvoyant profile picture
Judging by the early morning price action Facebook looks like it wants to go positive today. Maybe the market is starting to actually separate out winners from losers, and no company on the planet stands to benefit from this more than Facebook and Google. Netflix will probably see a jump in subscribers too. 

Not every company is going to be negatively affected if people stay home for a couple weeks, some are actually going to make more money than they otherwise would’ve.
Alfred Einstein profile picture
Gonna buy a few more shares today. This won't last forever and by the time FB earnings come around, this stock is going to be a lot higher than $160. Careful throwing out your bathwater everyone, there are babies in there.
Today’s pre-Market open activity is beginning to feel like a deepening 🐻 bear-market.
- Folks need to brace themselves for an eventful day in the Markets, ‘cause we could be in uncharted waters — way deeper than December 2018.✌️

**The macro environment — without much leadership, nor urgency from Washington, DC — doesn’t bode well for any sign of a quick bottom soon, my esteemed investing brethren.🖖
In this market you can forget about the pretty charts, etc. I am a buyer here at $135.
Too early to judge/conclude.
With Covid-19, market demand will continue to drop. And companies’ cuts on ads spent will impact FB earnings directly.
Both Facebook and Microsoft are a Buy at these low prices.
They will bounce back to their all time highs soon.
Oleh Kombaiev profile picture
I don't think so...
Pescadero Energy Partners profile picture
Title of this article lends itself to some real conviction. FB has probably gone done mostly, maybe hopefully all of part of the way down at least somewhat lol.
Value Digger profile picture
United Kingdom just announced 2% digital services tax on Facebook (FB), Alphabet (GOOG) and Amazon (AMZN):

again...ugh! They're raising taxes while their central bank in cutting rates? Are people just stupid?
There is a reason why Europe's economy has been stagnant for over a decade
jlaurie profile picture
FB and MSFT both are clearly undervalued
I agree. Long FB and MSFT.
I think we’ve finally hit “pay dirt” of Bear🐻Market territory today, but capitulation is still way off, ‘cause there is no “recovery policy relief” in regards to “stimulus package” coming out of the Administration, nor legislators in D.C.
- So, the Market will continue, like a rudderless ship 🚢 adrift in a COVID-19 storm⛈ — unable to reach “safe harbor”...✌️
Diesel profile picture
FB most likely won't even get affected by the virus but it drops along with everything else because there is so much fear and panic right now.
jojopuppyfish profile picture
And wouldn't it be really interesting if FB actually increased revenue during this crisis?
Why not? More people would theoretically be using FB even more.
gios95 profile picture
there will be a drop in revenues because companies will not worry about ads in this situation
jojopuppyfish profile picture
We really don't know that. And they might cut labor costs first.
What if more people shopped online? What if they used the internet and facebook and instagram even more?
Alfred Einstein profile picture
I just bought some shares, if any company is immune to virus scares it would be a company that runs the world's largest digital community... Plus it was already super cheap. I'm not a big facebook user, but these shares offer incredible value right now.
FB’s sole source of revenue is marketing budget. The first line item to be hit in A downturn due it’s variability. So the impending virus led recession will also impact FB, even if users grow. Still long FB!
rrkaas profile picture
Correct. Any marketing dollars will likely be pulled from print, radio, TV and delegated to the targeted audience via internet.
they're probably going to get about 20% cheaper
georgefelix75 profile picture
No way I’d buy over $150 in this market. $120 could go that low.
You can’t call how far Facebook will fall and trying is a complete waste of time
and apparently not "undervalued" enough for you to own...
Oleh Kombaiev profile picture
if I buy FB and write a positive article, do you think I will be objective?
Please excuse this naive question: I have seen this argument about authors trying to give objective analysis by not having positions in some stocks. But should an author not be putting their money where their mouth is? Also, from a personal investing point of view, is an author not missing out a potential opportunity they identified? As a small market participant, I don't get this.
tsxyz profile picture
12 Mar. 2020
if he owned the stock ppl would call him a shill. let's determine the value of his opinion by looking at his analysis, not his holdings.
Truebluealpha profile picture
I've been buying in chunks the past few months, was nicely up for a while and now, like everything else, it has gone to the dogs. And while I am inclined to accept that it is "technically undervalued," I also suspect technicals go right out the window on the day WHO announces an official global pandemic. So....tempting, but believe I will hold tight for the time being. Thanks for going out on a bit of a limb with this.
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