Most value investors correctly predicted that the "crisis" at Facebook (NASDAQ: FB), where Cambridge Analytica improperly used private data, is now in the past. With it, the #DeleteFacebook movement will end with Facebook losing little to no users. And because the site is so addictive and "sticky" with users, Facebook will come back stronger than before. Last week, FB stock added 4% and is up at yearly highs again. $225 a share seems a certainty.
Facebook closed at around $194 last week at a P/E of 28.5 times. Earnings will grow an incredible 76% and 26% in the next five years. The social networking site is doing everything right. It is adding TV video content on the site, Instagram is growing despite the resurgence in Twitter (NASDAQ: TWTR) and Snap Inc. (NYSE: SNAP) to a lesser degree.
Valuation
An EBITDA multiples model sets a $225 fair value for Facebook’s stock. This uses Twitter, Tencent (OTC: TCEHY), Alibaba (NYSE: BABA), and Alphabet (NASDAQ: GOOGL) as the benchmarks for the model.
Other Developments
Scrapping 'trending news' due to the criticism of the site spreading 'fake news' will add to the site’s credibility. It weakens the advantage traditional media like Fox (NASDAQ: FOXA) would have. The more reliable the news, the more users will trust the site.
Finally, Facebook’s dating layer will weaken Match.com’s (NASDAQ: MTCH) dominance in the online dating app market and draw in users who want to keep their dating profile separate from their friends. When MTCH stock is trading at 26x forward earnings, FB stock at 21x looks much like a discount.
Tech Insider
