Facebook CEO Mark Zuckerberg may have calmed investor nerves with his testimony this week to the United States Congress, but the stock is still down roughly seven per cent for the year.
No problem, says Stan Wong of Scotia Wealth Management. With more than two billion active users, the company and its revenue generating platform aren’t going anywhere.
Speaking to a US House oversight panel on Wednesday, Zuckerberg addressed concerns over Facebook’s role in protecting data privacy, saying that as the internet continues to grow in relevance to the lives and livelihoods of people worldwide, the need for protective regulatory frameworks becomes greater.
“So my position is not that there should be no regulation, but I also think that you have to be careful about regulation you put in place,” said Zuckerberg to the House Energy and Commerce Committee.
But while a stronger role for government within the social media sector could mean an altering of the business models for companies like Facebook, Wong, who gives the company a Top Pick rating, doesn’t believe so.
“When you look at the testimony that happened at [the US Congress] this week, I don’t see any major changes to the company’s model of monetizing user information for advertisers and ad targeting,” says Wong in conversation with BNN. “So, I don’t think that investors should expect longer term that we will see effects to the platform that Facebook has or to their operations or their sales, to be quite honest.”
“[Facebook] may spend some more money to fill in some of those holes with regard to privacy this year or even into next year. Those are short-term effects,” he says. “The fact remains that they are the largest online social network in the world with two billion users on an active basis and their ecosystem of the actual app Facebook, Instagram, Messenger and WhatsApp are very, very strong. You look at ad per revenue: that’s going higher and advertisers are paying more and more for that. They recognize that the ROI on that is doing well.”
Facebook’s share price has now rallied eight per cent since hitting a low of US$152.22 in late March, but at $164.00, the stock is still down at prices not seen since last September.
“We’ve owned Facebook for a very long time but we’ve bought some more shares over the last few weeks,” says Wong. “You want to take this contrarian approach. You’re seeing a lot of volatility in the marketplace. That volatility isn’t leaving anytime soon, so take advantage of it.”
“I think [Facebook] is attractive for intermediate- and long-term growth investors. Shares are at 23 times earnings with a 25 per cent long-term growth rate,” he says.