FB META Stock Analysis – Is Facebook/Meta Platforms Stock A Buy?

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Hello once again guys and welcome back To stock radar I'm so happy to have you Guys here and in this video we're going To be talking about Facebook stock that Is the stock that you guys voted on over In the private Facebook group Conveniently and so yeah we're going to Be talking about Facebook stock and Whether or not this is a good stock to Buy due to the recent sell-off related To this uh Cambridge analytica Scandal And we're going to talk all about that In this video here we're going to talk About the usual the pros and cons the Background of this company the barriers To entry the fundamentals and we're also Going to take a bit of a dive here into This Scandal and talk about what is Actually going on the details with that And what I expect to happen but uh as Always we're going to start off by Looking at some of the basics and I do Want to mention as well that I did add a New series here to the group where I'm Actually building a real stock portfolio With my money invested into it and I Added the first video this week it's With a separate brokerage account from My other accounts so if you guys want to Check that out that first video is Available and I actually put my first 1000 dollar investment into Facebook Stock because of the sell-off and the Sale that's been going on with this

Stock but first of all let's start with The basics here like we said the company Is Facebook they trade under the symbol FB and they are actually a newer company Only 14 years old they were founded back In 2004 by Mark Zuckerberg and they are Still an aggressive growth stock because Of the fact that this is a newer company They're not paying dividends and they do Have a lot of growth potential they've Still growing very fast despite the size They have become already they still are Growing at a very rapid rate we're going To discuss some of those numbers in a Little bit here they have a price to Earnings ratio of 26 and they have a Market capitalization of 464 billion It's just amazing to me to look at a Company like Facebook 14 years old and They before this whole Scandal went down Had a market capitalization of over half A trillion dollars in 14 years this Company went from nothing to being worth Half a trillion dollars over 500 billion Dollars absolutely amazing amazing now I'm pretty sure we're all familiar with What Facebook is but if not let's do a Little bit of background on this company And as I'm sure you guys know they're Not a dividend stock they are still in Full out growth mode reinvesting Earnings back into growth of the company And so they are not currently paying any Dividends to shareholders so they don't

Have a dividend streak or any of that Because they have yet to pay dividends But they're definitely a company that I Believe will have the potential to be a Dividend stock down the road once they Exit the growth mode and move more into That uh predictable income mode that Maybe we're seeing with a company like Apple but anyways a little bit of Background on Facebook they are a social Networking site and platform they Started off with the desktop Facebook Platform people would use it on their Computer that's when I first used to use Facebook and then they pretty much moved On to the mobile phones and people use The Facebook app and they are basically Offering a service that has become an Essential part of our everyday lives it Is certainly an essential part of mine I Mean I wouldn't have the private Facebook group without Facebook I have My Facebook page I spend thousands of Dollars a month on Facebook Advertisements Facebook Messenger is Very convenient so what they have done Is they are providing these services That are very valuable they've become an Essential part of our lives and by using These Services you are agreeing to have Massive amounts of data collected on you As far as your searching habits or your Spending habits or shopping habits and Facebook is keeping track of what you're

Doing all over the internet as a result So they're collecting massive amounts of Data on you and then what they are doing Is they are putting that data out there Available to advertisers so advertisers Can come in and say I want to advertise To people who are 26 to 30 years old That are likely going to be buying a new House in Phoenix Arizona and they are Able to do that by having all that data Collected they can find exactly who fits That criteria and advertisers can only Advertise directly to those people if They want to so that is why Facebook has Become the giant that they have today What they are at the end of the day They're in advertising and a data Company they're collecting massive Amounts of data on their users and then They allow advertisers to Target ads Specifically to certain groups of people By using that data and in return Advertisers are spending a lot of money On Facebook ads and despite the fact That it might be more expensive to run Targeted ads they're wasting a lot less Money because they know every single Person viewing these ads is likely Somebody who would be interested in that Product or service whereas if you took Out a billboard on the side of the road You have no idea who's going to see that Billboard because random people are Going to be driving by it so these new

Digital advertisement techniques allow You to spend a lot less money on wasted Traffic and showing your ads to people Who would have absolutely no interest in What you are looking to offer them so in A nutshell that is the business model For Facebook but I also want to mention A few other large companies that Facebook owns so first of all we have Instagram they own Instagram they have Facebook Messenger which has become huge In it of itself they have WhatsApp they Also have Oculus VR are the Oculus Virtual Reality company and they also Have a bunch of smaller companies and Smaller Acquisitions they've made over The years but those are the most notable Or noteworthy companies under the Facebook name so Facebook is in control Of some very powerful platforms we're Talking about WhatsApp that's very Popular overseas we're talking about Instagram I mean so many people use Instagram and this is a company that They bought for a billion dollars they Absolutely stole Instagram in the grand Scheme of things as far as the potential That platform had and what they paid for It years ago so that has been a big Winner for them and Instagram is one of The most popular platforms out there and With the issues Snapchat is having with Their new layouts and losing users I Know Instagram is huge for me and if you

Guys are not following me on Instagram It's Ryan Scribner official over there I'm definitely trying to build up my Instagram following but I'm assuming you Guys are probably following me there Because I'm guessing you guys are my Most loyal fans here being a member of Stock radar but that is the background On Facebook that is the business that Facebook is involved with they rate data And advertising company and so now let's Get into the pros of investing in Facebook and the very first one that I Have is they have a low beta a beta of 0.63 so when I'm out there looking for a Stock to recommend to a beginner I Always want to make sure this is a Investment with low volatility and as We've talked about before volatility is The upward and downward price movements And so if you look at a stock with a Beta of over one that means that stock Is more volatile than the overall market And if it has a beta of less than one That stock is less volatile than the Market so Facebook actually has a beta Of 0.63 meaning this stock has very low Volatility making this a suitable pick For a beginner because it's not going to Have those crazy upward and downward Price movements keep in mind a beginner Is not seasoned with the market they're Not used to seeing those price swings And they might make emotional decisions

As a result and that is why I always Recommend low beta stocks to beginners And so if you are a beginner in the Stock market and you're looking for a Decent investment that's not going to Have those drastic price swings Facebook Might be a good choice for you simply Because they have a beta of 0.63 Second of all looking at the Fundamentals as well we see that Facebook has a forward PE of 18 and a Peg or price to earnings to growth ratio Of 0.86 now if you guys took fundamental Stock analysis 101 that's part of this Group so what that PEG ratio shows you Or the peg is whether or not all of the Anticipated growth is priced into Today's number so if that stock has a PEG ratio of one that means that stock Is fairly valued if it's above one That's the I guess overvalued and if It's below one that stock is undervalued So based on the anticipated growth for Facebook that stock is undervalued Looking at the PEG ratio having a 0.86 Now as far as comparing this to their Peers we're going to compare Facebook to Twitter and Google keep in mind when You're looking at the p e ratio the Forward p e the peg these are comparison Tools and you're going to use them to Compare this to other companies so Looking at Twitter Twitter has a forward PE of 41 and a PEG ratio of 2.65 and

Then keep in mind Facebook has a forward PE of just 18 and a peg of 0.86 so Looking at those figures Twitter stock Is significantly more expensive and then When we look at Google they have a Forward PE of 21 and a peg of 1.07 so Looking at those numbers right there Facebook is less expensive in terms of The forward PE and the peg then both Twitter and Google so looking at that Those are good numbers to see here for a Value investment the other Pro for Facebook is the increase in spending Expected for worldwide digital Advertising worldwide digital Advertising is expected to grow 46.3 Percent from 2017 to 2020 according to Statista so just think about that for a Moment 46.3 percent growth from 2017 to 2020 and this is a digital advertising Company that is the bread and butter for Facebook yes they do have a couple of Other Niche products and services they Offer but the bread and butter for Facebook is the advertising money and When we're expecting to see a 46.3 Percent growth in digital advertising in A very short period of time what company Do you think is going to benefit largely From this increase in spending it's Going to be Facebook and it's going to Be Google and that moves in here to Another Pro we have is that this is a Duopoly right now Facebook and Google

Have a duopoly of digital advertising And they are the two largest companies Out there offering digital advertising Now just how large is their presence in The advertising space it's absolutely Unbelievable to me but one out of every Four dollars spent on media advertising Worldwide is spent with Facebook or Google one out of every four dollars 25 Percent of the media advertising budget Goes into the pockets of Facebook and Google that is how large these companies Are in terms of advertising and that's Not just digital advertising that's all Media advertising that is the amount Going into the pockets of Facebook and Google and then the other Pro for Facebook is the fact that they have very Active users as of quarter four of 2017 They have 2.13 billion monthly active Users so just think about this for a Second the size of the world population I believe it's seven to eight billion Somewhere around there you guys can Correct me if I'm wrong but think about That fact right there that if it's Around 8 billion then we know that One-fourth of the world's population is A monthly active user of Facebook but Also consider the fact that a large Portion of the world is not even Connected to the internet so the amount Of presence Facebook has the size of Facebook the number of monthly active

Users is absolutely insane but what's Going to shock you even more is how this Company is still growing despite the Size that they already are so let's look At a few more of these numbers from the Fourth quarter earnings report of 2017. So first of all we saw 14.2 percent Growth in daily active users from the Fourth quarter of 2016 to the fourth Quarter of 2017 and in that same time Frame we saw a 14.5 percent bump in Monthly active users we saw a 47.3 Percent bump in Revenue we saw a 28 Percent increase in worldwide average Revenue per user we saw a 61 percent Increase in operating income and a 19 Increase in earnings per share so Looking at those numbers right there we Can say without a doubt that Facebook is A growth Beast they are growing at a Very rapid rate we're seeing Double-digit growth across the board and Despite the fact that they have over 2 Billion monthly active users they are Still growing at a crazy rate as far as Their growth rates for daily active Users and monthly active users and on Top of that they're making more money From their existing users as their Average revenue per user has increased Significantly in just one year's time And then the final Pro that I have for Facebook is the fact that this stock is On a good sale right now because of this

Data Scandal we're going to talk about Shortly Facebook stock is down 17.3 Percent from the 2018 high and this Might be a good opportunity to enter a Long position in Facebook now I'm not Saying this is going to be something That just gets swept under the rug as Far as this data Scandal it's a big deal And we're going to talk about that Shortly but you do want to take Advantage of sales like this because It's not often that you're going to see This kind of thing happen so the first Con obviously it's the big one it's the Cambridge analytica data Scandal we're Going to talk about that in a little bit More detail in a second here the second Con is there is a Federal Trade Commission investigation against Facebook this has happened in the past And this could result in a one to two Billion dollar fine for Facebook now let Me ask you a question we said already This is a company worth 464 billion Dollars do you think a one to two Billion dollar fine is going to be Detrimental to this company absolutely Not that is a very small fine in terms Of the amount of Revenue Facebook is Earning and the size of this company That is not going to affect them at all If there is a fine of one to two billion Dollars just due to the size of this Company we also know that there are

Multiple state attorney generals filing Investigations against Facebook due to Their data and privacy practices and There are multiple lawsuits against Facebook right now as a result of that And due to all this fear around this Data Scandal there's a ton of bad press Right now about Facebook and that is why We've seen that share price dip that is Why we've seen Facebook stock go on sale Is because of the bad press and me as an Investor that is what I love to see I Love to see bad press surrounding a Company because that usually results in A great buying opportunity now is Anything going to change with Facebook I'm going to talk about this a little Bit later on but I just want to briefly Mention this we have to think about the Size of this company okay and the fact That they have a duopoly between Google And Facebook so if people are not happy With what Facebook is doing in terms of Their privacy policies and the amount of Data they're collecting what other Option do you have are we going to go Back and start using Myspace again or Are we going to delete our Facebook Profiles all together my guess is Absolutely not and as far as advertisers Go what other option do they have I mean Sure they can go over and spend more Money with Google but as far as the Digital advertising goes there aren't a

Lot of other options out there because They have a duopoly so what do I think Is going to happen as a result of this I Think nothing is going to happen at all Nothing's going to change with Facebook They're going to keep doing what they're Doing and advertisers don't really have A choice of where else to go and the People using Facebook the actual users Don't have another option as well Because Facebook has become the dominant Social media platform nobody's going to Just start using Myspace again because Your friends aren't on MySpace you're Going to be annoyed that they're Collecting this massive amount of data But you're not going to do anything About it at the end of the day that's Just my opinion I know personally I Would never delete my Facebook I use it For my business it brings in a lot of Revenue for me and I use it to spread my Message out there to the world and I'm Sure they are collecting a lot of data But there's really no other option at The end of the day and then another con Is there is this trending hashtag out There right now of hashtag delete Facebook a couple of big celebrities Have deleted their Facebook that Includes Will Ferrell as well as Elon Musk and Cher they are trying to protest Against Facebook but again imagine how Many celebrities have profiles on

Facebook and sure a couple of large Celebrities have deleted their Facebook Profile but this is going to be a very Short-lived thing here you're not going To see a lot of people deleting their Facebook accounts just in my opinion Because it would be a stupid business Decision to make at the end of the day If you have such a large presence on This platform you're not just going to Delete your account out of protest and Then finally all of this together is Giving people fears that there is going To be regulation of these big digital Advertising companies AKA Facebook and Google and maybe that's for the best to Be honest with you guys seeing these Data practices they have in the Privacy Policies but again do we really expect This to happen I certainly do not just Due to the size of these companies and The fact that Facebook and Google could Lobby against legislation and they have Very Deep Pockets to do so but those are The fears right there it basically has To do with this data scan handle and People having fears of Regulation but Now let's go ahead and talk more about The Cambridge analytica data Scandal and What that's all about because a lot of People are very confused by it and I'm Going to try to explain it in the Simplest way possible now I took a bunch Of notes on this so I'm going to be

Reading off my paper here but this is The details on the Cambridge analytica Scandal so Cambridge analytica is a Political consulting firm and the big Problem here is that they collected data Through Facebook on 50 million users Without having permission to do so from Those users so what the issue is here is That they may have targeted political Advertisements towards Trump voters and Brexit voters sometime in 2016 and People are saying this could have Possibly skewed the results of that Brexit vote as well as the 2016 Presidential vote so this is actually a Pretty big deal here but how did this Actually go down so there's basically Eight things that happened here first of All Facebook offered open graph API Which allowed outside app developers to Access user data for the development of Their apps second of all later on after This happened the FTC slaps the hand of Facebook and said don't be sharing user Data without permission and Facebook Basically said Fu I'm going to do it Anyway the long story short here number Three we know that this guy named Alexander kogan created an app called This is your digital life he spent a lot Of money paying people to download that App and 270 000 users did so and their Data was collected for academic research Now here's where the problem came in due

To that open graph API that app Developer Alexander kogan was able to Take that 270 000 users their data and Get access to their friends which was a User pool of 50 million so by having the Data of 270 000 he was able to get the Data of 50 million and then he basically Gave that data to Cambridge analytica The political consulting firm and that Data was used in both the brexit vote And the Trump election and they sent Around targeted ads uh based on using That data that they got without the Right consent so that is the issue that Is what everyone is freaking out about Right now now in all honesty do we think That this really caused Trump to be Elected or for the brexit vote to go the Way it did probably not but at the end Of the day we should not be having our Data taken without our permission and we Did not give permission those 50 million People did not give permission to Cambridge analytica to harvest their Data but they took their data through The back end by using this loophole with The apps and at the end of the day the Only one you can blame for this is Facebook I'm sure the FTC is going to Get them another slap on the wrist here With a couple billion dollar fine but in The grand scheme of things is this Really going to affect Facebook I would Say absolutely not but that is the

Details there with the Cambridge Analytica Scandal so moving on we know That is why Facebook stock went on sale The Big Data Scandal and all this bad Press so let's go ahead now and talk About the barriers to entry associated With Facebook or what would stop me from Starting my my own social media Network First of all one of the biggest ones is The data the amount of data that Facebook has if I want to go out there And start doing what Facebook is doing I Have to create a service that's going to Be very useful to people out there and Different than what's already out there I'd have to make my own social media Website get millions and then billions Of people to use it and then collect Data on all of them and then create a Back-end advertising platform for Advertisers it would be literally Impossible look at how much money Snapchat is burning through attempting To do this Twitter's trying to do the Same thing they just haven't been able To do what Facebook and Google have been Able to with all this data and that user Base second of all is the network effect It is the fact that Things become more Valuable as more people use them if Nobody used Facebook then it wouldn't be A very valuable service it would be kind Of like Myspace people stopped using That and it's pretty useless now but

Because billions of people like we said 2.1 billion people use Facebook every Single month it becomes very valuable Because all of your friends are there And that is the network effect so that Is one of the largest barriers to entry As far as social media websites and apps And platforms go number four is the Startup costs associated with building a Social media platform advertising it and Getting a user base and then number five Is the fact that Facebook and Google Have very Deep Pockets Facebook and Google acquire companies left and right So if they believe a company is remotely Competitive with them they're just going To buy them they're not going to let Them build up and become a large company They tried to buy Snapchat and yes Snapchat said no but other companies out There like Instagram they said oh this Platform might be remotely competitive With us oh WhatsApp might be competing With us how about we just own them Instead of competing with them so Because they have very deep pockets they Have the ability to just buy their Competition and so if there are other Platforms that emerge that are going to Be competing with Facebook or Google They're going to do their best to try to Just buy that company and have it under Their name but anyways guys that wraps Up the beginning of this analysis here

On Facebook stock now we're going to Jump over and look at the fundamentals Okay so now we're going to look at the Fundamentals of Facebook stock and as Always we are going to start by looking At the assets and honestly Facebook has One of the best balance sheets out there That I have seen very similar to Google's balance sheet because they both Operate in a very similar business and It's a very appealing balance sheet for Investors and let's start off by looking At the total assets so as you can see Here total assets have grown every Single year since 2014 at an average Rate of 28.4 percent per year which Makes this an aggressive growth stock Seeing that kind of growth from this Company and current assets have grown Every single year since 2014 as well at An average rate of 53.9 percent per year Also very impressive now what's amazing To me looking at this balance sheet is If you look at the inventory line there We see zero dollars in inventory because This is an inventory free business they Have no inventory and that is one of the Most appealing parts of investing in a Company that is solely be involved with The internet they have no inventory and That is just one of the qualities to Love about an investment like Facebook Now as you can see there are cash and Cash equivalents declined 9.3 percent

From 2016 to 2017 but the cash pile is Not a problem at all for Facebook we'll See that more when we move on to look at The liabilities now total assets grew Every quarter in 2017 and it increased 23 percent from quarter one to quarter Four very impressive asset growth and Current assets grew every quarter in 2017 as well growing 31.5 percent from Quarter one to quarter four so very Impressive growth of the assets here and A very consistent growth as well next we Are going to look at the liabilities and This is where it is really amazing the Kind of balance sheet that Facebook has Here so yes total liabilities have Increased every single year since 2014 And total liabilities increased in every Quarter in 2017 but you have to realize They have very low debt compared to Their assets so for first of all one of The main things I notice here is the Fact that Facebook has zero dollars in Long-term debt they have absolutely no Long-term debt and their current assets Have unbelievable coverage of their Current liabilities at a ratio of 12.92 To 1 in quarter four of 2017. you're not Going to find this kind of coverage with Any other companies out there maybe You're going to look at Google and find This but the amount of cash the amount Of assets they have in relation to their Liabilities is really incredible here

And then the other part of this that is Equally incredible is the fact that cash And cash equivalents have 79.4 percent Coverage of total liabilities as of Quarter four of 2017. so Facebook could Pretty much almost cover all of their Debts with the cash they have on hand They could cover almost 80 percent of Their debts with their cash on hand so This is a very very healthy balance Sheet a very appealing balance sheet for Investors and this is a company with one Of the lowest debt loads that I have Ever seen especially noting the fact That they have zero dollars in Long term Debt moving on now we're going to look At the gross profit as well as the net Cash flow from operations so gross Profit has increased every year since 2014 at an average rate of 50.6 percent Per year and gross profit increased 65.3 Percent from quarter one of 2017 to Quarter four of 2017. now net cash flow From operations has increased every year Since 2014 at an average rate of 49 per Year and net cash flow from operations Increased 51.7 percent from quarter one Of 2017 to quarter four of 2017. these Numbers are absolutely incredible for a Company the size of Facebook they are Still an absolute growth beast at this Point in time seeing 50 growth of the Gross profit and uh also equally as Impressive growth with the net cash flow

From operations and I also wanted to tie This in here as well looking at the Profitability and liquidity ratios You're not going to see numbers like This with uh any other companies out There maybe with Google but looking at The current ratio the quick ratio the Cash ratio all of these over a thousand Percent that just goes to show you how Low debt this company has and then Looking at the profitability ratios look How much these have improved over the Years every single one of these have Improved their gross margin operating Margin pre-tax margin profit margin Everything has improved significantly Since 2014 and you look at the fact here This company has an operating margin of 50 percent a profit margin of 39 these Are fantastic numbers with an after-tax Roe of 21 there's nothing bad that I can Say about any of these uh financial Documents here this is exactly what You're looking to see as an investor This is one of the best balance sheets And income statements and these are some Of the best margins I've seen out of the Companies that I have researched and Then as far as the stock goes let's take A look at Facebook stock over the last Year and over the last five years so Facebook stock is up just 12.2 percent Over the last year due to the sell-off That took place we discussed that that

With the data scandal going on now Meanwhile the S P 500 is up 11.5 percent In the same time frame meaning that Facebook has slightly outperformed the Market in this time frame here over the Last year now over the last five years Facebook stock is up 483.4 percent Compared to a 70 return from the S P 500 So they have significantly outperformed The market over the last five years so My whole opinion on this is that this Data Scandal has turned back the time For this stock it's at a price that it Hasn't been at since about July of 2017 And while it is possible that Facebook Stock could continue to fall it seems Very unlikely to me and uh really what Would have to happen is for the Government to step in and regulate this Company or for major advertisers to pull Off the platform and due to all the Reasons we outlined earlier I just don't See either of these two things happening And so in my opinion this is one of the Best entry points we have seen for Facebook stock in a very long time and Then finally we'll wrap up here with With some key financial notes from the Quarterly earnings report for quarter Four of 2017 we saw advertising Revenue Increased 49 percent year over year now Facebook reports their revenue in two Segments it's advertising and then Payments and other fees and the payments

And other fees Revenue fell six percent Year over year but this is a very small Piece of their business the primary Source of their revenue is advertising Uh total revenue increased 47 percent Year over year income from operations Increased 63 percent year over year net Income increased 56 percent year over Year and diluted earnings per share Increased 54 percent year over year so What we can tell looking at all of this Is that Facebook stock is an absolute Growth Beast they have fantastic numbers Here one of the best balance sheets I Have ever seen here analyzing different Stocks and so on a fundamental level Facebook is an ideal investment and if You're ever looking to look for an Example of a good balance sheet you're Going to want to look at companies like Facebook in Google for an example but Anyways guys that's going to wrap up This analysis I thank you so much for Watching this video and I will see you In the next one

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