Social media giant Facebook (NASDAQ: FB) may be feeling the heat on privacy issues connected to its business model, but for investors it may be a long while before a better opportunity to jump into the stock comes along, says Barry Schwartz of Baskin Wealth Management.
On Tuesday in a move that’s bound to stir up more controversy, sources have revealed Facebook’s so-called community standards, rules used by company moderators charged with deciding which posts and content should be removed from the site.
Facebook’s share price, already at a seven-month low, has dipped further today, down almost four per cent in Tuesday’s trading.
But those jittery investor nerves shouldn’t be an issue, says Schwartz.
“I don’t know if it’s a generational buy here, because there could be some more noise — and if there’s one more issue, the stock’s gonna get slammed — but for long-term investors, this is a great entry point,” he told BNN. “You’re essentially buying at a market multiple with a beautiful balance sheet. One of our best ideas at the moment.”
“I think you’ve got an opportunity to buy a company that’s probably going to grow its revenues by 30 to 40 per cent this year, with margins that are obscene and just an unbelievable runway of opportunity especially with emerging markets,” Schwartz says.
“Facebook’s growth in North America and Europe is kind of mature, but the monetization opportunities outside are limitless. I read a blog post where someone asked someone in Africa, ‘Do you have the internet?’ and they said, ‘No, but I have Facebook,’” he says.
Schwartz argues that in a peer comparison with other tech giants of the moment, Facebook’s stock is actually a bargain. “Facebook is trading at less than 23x forward earnings,” he says. “It’s also growing those earnings at 30 to 40 per cent a year, so if that continues, in the next four years, you would’ve bought it today at ten times forward multiple.”
Facebook will be releasing its first quarter earnings report on Wednesday, with investors keen to see whether or not the company’s advertising business has suffered due to revelations in March that an estimated 87 million Facebook users had their data improperly shared with consulting firm Cambridge Analytica during the 2016 United States Presidential campaign.