Facebook is a great long term investment, this investor says

Advertising has always been Facebook’s (Facebook Stock Quote, Chart, News NASDAQ:FB) real focus but now that the company is branching into e-commerce, the growth possibilities are huge, says portfolio manager John O’Connell, who recently named Facebook one of his Top Picks for the next 12 months.

It was back in the spring when everyone was in lockdown mode that Facebook made the announcement that it’d be shelling out $5.7-billion for just a ten per cent stake in India’s largest mobile operator Jio Platforms, whose Reliance Jio mobile network has over 388 million users.

Facebook’s investment signaled its desire to get in on the fast-growing internet user base in the world’s second largest country by population.

“India is a special place for us,” said Facebook CEO Mark Zuckerberg in an April video. “It’s home to the largest communities around the world on Facebook and WhatsApp and there are a lot of talented entrepreneurs. It’s also in the middle of a major digital transformation that’s being led by organizations like Jio.”

“It’s even more important now than ever that people have the tools to connect with each other and that businesses can find ways to operate online and this is something that we think that we can help with, which is why we are proud to be partnering with Jio,” Zuckerberg said.

The importance of emerging markets like India to the big tech companies was underlined a few months later when Google also paid $4.5 billion for a stake in Jio, which has already spent billions in building out its digital infrastructure across India. And with about a half a billion people still not online, the Indian marketplace is still in its early days.

All that potential should be forefront to investors interested in Facebook, argued O’Connell, president and CEO of Davis Rea.

“The Jio division is the largest cell phone operator in India now and they’re also doing projects in Brazil. They’re moving full on into e-commerce in India and it’s a huge opportunity,” said O’Connell, speaking on BNN Bloomberg on Wednesday. “Jio is the number one cell phone provider. They've made it very affordable and accessible for all Indians. “

“There are about 450 million cell phone subscribers in India alone and that number only counts for about half of the population, so we really do believe that the relationship between Jio and Facebook could really drive meaningful further revenue growth in the future,” O’Connell said, “Facebook is increasingly merging all those different apps WhatsApp, Instagram, Facebook, and Messenger and it’s going to be a very, very powerful movement [in] e-commerce.”

Facebook’s share price has been on a slide through the month of September with the rest of the tech sector, but the stock remains up 22 per cent for the year.

O’Connell said Facebook will apply to e-commerce its well-demonstrated skills at raking in advertising dollars and the stock should respond appropriately.

“Facebook is going to collect more of that revenue, that toll, that they’ve been so good at taking from the advertising perspective. They know so much about consumers. They’re going to continue to provide attractive media for businesses to approach consumers and for businesses to use Facebook as a platform for selling products and services,” O’Connell said.

“I think it's a great long term investment,” he said.