Last week was another forgettable one for Facebook (Facebook Stock Quote, Chart NASDAQ:FB), as the company got hit by both a massive data breach involving more than 50 million users and the acrimonious departure of Instagram founders Kevin Systrom and Mike Krieger. But investors need to look past the headlines, says Greg Newman, senior wealth advisor at Scotia Wealth, who sees tonnes of growth ahead for Facebook stock.
“These guys are a deal,” said Newman, in conversation with BNN Bloomberg recently. “They are trading at 17x 2020 [earnings] with one-third of the world’s eyeballs. Even though they took down their growth [projections] — they’re probably being conservative, given all the scrutiny congressionally that they’re under — but even still, we’re modelling 25 per cent share growth, and if you’re trading at 25 per cent share growth at a market multiple for something that is as disruptive as this, I think it’s a really good deal.”
Last Friday, Facebook revealed that an unknown hacker had compromised the accounts of 50 million users by exploiting a number of bugs in the platform’s code. The breach comes during a year in which security and privacy issues have been front and centre for the social media giant which was earlier rocked by the Cambridge Analytica and election meddling scandals.
News also broke that Systrom and Krieger, who had been part of the Facebook team since it acquired Instagram in 2012, announced their departure, reportedly due to tensions surrounding increased synergies between Facebook and Instagram.
“The good news is [Systrom and Krieger] were around for six years — that’s atypical for developers to stick around that long,” says Newman. “The market did view it as a negative and there was some press that it would be far more of a negative. I don’t think it is. Obviously, the [data] breach is a negative.”
So far, it seems, the events haven’t impacted Facebook’s share price, which closed last week up two per cent. Now down seven per cent for the year and trading in the mid-$160 range, Facebook looks like a clear bargain, says Newman.
“You know, buying in the $160s kind of reminds me of [when] I bought this name in the $20s. Nobody would touch it and it kind of reminds me of that time. I think you can buy it,” he says.