There are many reasons to feel bullish about online advertising champion Facebook (Facebook Stock Quote, Chart, News NASDAQ:FB), says Scotia Wealth’s Stan Wong.
But for investors looking to pick up a FAANG stock cheap, all you need is one stat, the fund managers says: It’s down 14 per cent over the past month.
The FAANG group of tech names —including Facebook, Apple, Amazon, Netflix and Alphabet— have been hit hard by the broader market selloff this week, with all but Netflix recording double-digit losses since last Friday’s close.
At the same time, the news cycle around Facebook continues to churn, with the company two weeks ago announcing it would let US political candidates publish sponsored content on its range of platforms but without having the ads publicly tracked or catalogued.
Meanwhile, US Democrats have criticized Facebook on gun control, saying that while the company banned the sale of guns on its platform in 2016, sales are still being conducted within private groups on Facebook.
Those notes come alongside wider and ongoing investigations by various US and European bodies into potential anti-trust concerns over Facebook and other tech giants.
But even with all that noise and bother, Facebook is still humming along with super-strong fundamentals, and its those numbers towards which investors should be turning when deciding whether or not to buy the stock, according to Wong, portfolio manager and director of wealth management for Scotia Wealth.
“I continue to like Facebook. It’s probably one of my favourite names in the FAANG space,” said Wong, in conversation with BNN Bloomberg on Thursday. “We know it's the world's largest online social network with two and a half billion monthly active users, and still going higher.”
“90 per cent of his revenues come from advertising, they’re going to earn $86 billion in revenues this year and they have a 32 per cent growth rate over the last five years in revenues, so that's spectacular. Look at Apple, it's 5 per cent. There’s nothing wrong with Apple in terms of how they perform but Facebook is a very strong growth company.”
Facebook’s share price dropped sharply at the end of January with the release of the company’s fourth quarter earnings, which although recording beats on its top and bottom lines was nonetheless received poorly by the market due to rising expenses and narrowing operating margins.
Facebook’s Q4 featured revenue up 25 per cent to $21.08 billion compared to the consensus expectation of $20.89 billion and EPS of $2.56 per share versus the Street’s forecast of $2.53 per share. Daily active users grew by nine per cent year-over-year, while average revenue per user came in at $8.52 compared to the consensus $8.38.
Wong said Facebook is showing no strong signs of slowing down.
“Their earnings have been growing at 30 per cent. Facebook, Instagram, Messenger and WhatsApp are very, very widely used advertisers love it: the ad revenue per user, ARPU, continues to grow and they have reported 21 consecutive quarters of positive earnings,” he said.
“The stock’s now down 14 per cent, so it’s a good time to chip away,” he added.
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