Holding Facebook (NASDAQ:FB) stock through its quarterly earnings looked like a guaranteed gain. Instead, the stock plunged from $220 to around $202 last week afterward. Why did Facebook forecast lower growth in the quarter ahead?
Facebook posted revenue growing by almost 25% as daily active users grew 9% to 1.66 billion. It had 2.5 billion monthly active users. So, with the stock at a P/E to the growth rate of a 1x multiple, the stock may offer value to investors seeking growth. Plus, with headcount up 26%, the company is not acting as if its business is slowing.
The company added $10 billion to the share buyback authorization. This suggests that the lower share count will offset the impact of the ongoing litigation against it, increased regulations on privacy, and other ad-targeted headwinds.
Facebook’s lowered forecast of revenue growing sequentially in the low to mid-single digits may prove to be a temporary setback. Advertisers still must embrace the network and its other properties – WhatsApp, Instagram, and Facebook Messenger. They will allocate more spend to the platform as other formats lose their audience.
Your Takeaway
Facebook stock is holding its uptrend, but if it breaks down, investors may accumulate it in small amounts. The long-term prospects are still bright. And the growth at a reasonable price is attractive at lower levels.
