Facebook stock is a bargain right now, this investor says

Fans of Facebook Inc (NASDAQ:FB) are likely happy that 2018 is almost over, but while there may be more carnage yet ahead for the stock, Facebook along with the social media sector as a whole will survive and prosper, says Gordon Reid, President and CEO of Goodreid Investment Council, who argues that investors should approach impending regulation as a buying opportunity.

FB was up slightly in trading on Thursday, with the stock recently dipping to prices not seen since early 2017, back before the election meddling charges and privacy scandals had really taken root. Those issues have stuck around, however, the latest being a New York Times report on Wednesday that Facebook’s data-sharing issues go well beyond the Cambridge Analytica data-mining scandal, as the company was found to have been for years sharing its users’ personal data with some of the world’s largest tech companies including Microsoft, Amazon and Spotify.

At the same time, news broke yesterday that the District of Columbia has filed a lawsuit against Facebook in connection with Cambridge Analytica, the latest in a wave of lawsuits and investigations connected to the sharing of users’ information.

Bleak as it may seem, Reid says that the current morass is merely a stage in the evolution of social media, which undoubtedly will result in regulations putting a tighter rein on companies like Facebook but through that process will be helping to establish the sector as a whole.

“The front page of the newspaper tends to take this issues in isolation … [but] I view this as a broad application of the evolution of social networking and what is acceptable and what is not,” says Reid, President and CEO of Goodreid Investment, to BNN Bloomberg.

“I think the central issue is regulation,” he says. “Just like a great many industries and sectors that have been around for decades, there are often specific regulations around specific sectors. Banking and the financial group, for example, we have all kinds of regulations of what is acceptable and what is not. We don’t have that in the social world, it’s too new.”

Facebook last reported quarterly earnings on October 30, producing an earnings beat in its fiscal third quarter but missing on revenue, generating $13.73 billion versus analysts’ consensus projection of $13.78 billion, and on daily active users, tallying 1.49 billion versus the expected 1.51 billion.

Still, the company’s average revenue per user was up two per cent worldwide quarter-over-quarter and was growing at a seven per cent rate in the US and Canada compared to last year’s Q3. Reid insists that these days, the negative market sentiment towards Facebook opens up possibilities for the savvy investor.

“I tend to look at Facebook more as an opportunity, knowing that regulation is coming and using the headlines as opportunities to take advantage of the investment,” he says.

“It’s trading at less than 20x earnings, it’s growing very rapidly in the mid to high-20 per cent rate, the adoption level from a digital advertising standpoint is wide open.”

“Nobody is going to put the [social media] industry out of business because of malfeasance,” he says. “What we’re going to have is a burgeoning and healthy social network business with regulation, which might slow down growth but it’s not going to stop it.”