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3 Reasons to Buy Facebook, and 1 Reason to Sell | The Motley Fool

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Facebook is shrouded in controversy, but there are several reasons to invest in Mark Zuckerberg’s empire.

Justin Pope

Key Points

  • Facebook went from Mark Zuckerberg’s dorm room to a trillion-dollar social media conglomerate.
  • The company is highly profitable and is still growing at a substantial rate.
  • Regulators and politicians don’t seem to like Facebook much, but the quality of its platforms is hard to ignore.

Mark Zuckerberg and his social media company Facebook (NASDAQ:FB) have come a long way from the origin story depicted in The Social Network, a fictionalized account of actual events that came out 11 years ago.

Evolving from a simple social media website, Facebook is now a conglomerate with a tight hold on billions of consumers’ eyeballs. It’s also gotten into its share of hot water over the years with regulators over its thirst for consumer data, shrouding the company in controversy.

That’s what we see on the surface when it comes to this company (and its stock). But as we peel back the layers of the onion, there emerge at least three reasons to buy Facebook stock and one reason to sell it.

Person happily engaging with smartphone.

Image source: Getty Images.

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Buy reason No. 1: Facebook is still growing (and evolving)

Facebook has become much more than the social network the company is named after. CEO and founder Zuckerberg has been somewhat sneaky with acquisitions over the years, acquiring Instagram for $1 billion in cash and stock in 2012 and the messenger app WhatsApp for $16 billion in stock and cash in 2014. Today, Instagram and WhatsApp have 1 billion and 2 billion users, respectively.

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The trio of Facebook, Instagram, and WhatsApp have driven the company’s user growth, from 2.4 billion monthly active users in the second quarter of 2019 to 2.9 billion in Q2 2021, a 20% increase. In other words, more than one-third of the global population now uses a Facebook-owned social media platform at least once a month.

Zuckerberg has made wise decisions in his acquisition of Instagram, correctly predicting that users would gravitate toward image-based content on social media platforms. He has again indicated a belief about the future of how we interact, focusing on the metaverse, where the internet and physical worlds overlap, as the next digital frontier.

Facebook owns Oculus, a company that makes augmented/virtual reality headsets. It recently put together a team dedicated to the metaverse and announced its first iteration of smart glasses via a partnership with Ray-Ban. It seems clear that Facebook is trying to expand the limits of its reach beyond the phones we hold in our hands.

Buy reason No. 2: Facebook makes a ton of money

Facebook’s ability to make money from its users is impressive. In its most recent quarter, Q2 2021, the company generated $10.12 in revenue per user, a 43% increase from just a year prior. The company makes the vast majority of its revenue through advertising (about 98%), collecting a wide range of data from its users, then selling targeted ads to other brands based on that data. 

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Its business is very profitable, converting 29% of its Q2 2021 revenue into free cash flow (FCF), amounting to $8.5 billion FCF on $29 billion in revenue. Facebook doesn’t pay a dividend; it reinvests back into the business to drive growth while using excess cash to buy back shares to grow its per-share earnings.

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Buy reason No. 3: Facebook’s stock price is reasonable

Its market cap of $1.02 trillion makes it hard to call Facebook’s stock “cheap,” but its valuation could be reasonable. Facebook’s expected full 2021 earnings per share of $10.09 puts the stock at a price-to-earnings (P/E) ratio of 35.

Analysts estimate that Facebook will grow its earnings by 22% per year for the next three to five years, so even if a P/E ratio of 35 isn’t “cheap,” the company could quickly grow into its valuation despite its large size.

A reason to sell: Government threats are unpredictable

Facebook’s biggest problem is that it draws negative attention from regulators and politicians around the world for its invasive data policies, the occasional spread of misinformation on its platforms, and its role in how information spreads among the public.

The company was caught up in a scandal that broke in 2018 when a company called Cambridge Analytica harvested user data from millions of users without their consent in 2014-15 that was used to target voters in several 2016 elections. The Federal Trade Commission fined Facebook $5 billion for failing to protect its user data.

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Facebook has brushed with the U.S. government on other instances, including allegations of anticompetitive practices, with some regulators calling for the company’s breakup. The Federal Trade Commission launched another antitrust lawsuit in August. Facebook is getting larger, not smaller, so investors need to be aware that there is always an unpredictable risk of facing pressure from the government.

Does the good outweigh the bad for Facebook stock?

Despite the ongoing risks of government interference, Facebook is a great company that grows and generates a ton of cash for both the business and its investors. The metaverse addressable market could be worth as much as $280 billion by 2025, and Facebook is aggressively positioning itself to get its share. Success could mean years of continued growth for the company.

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Meanwhile, despite its $1 trillion market cap, the stock is reasonably priced. Investors should monitor the company’s ability to monetize its user base to indicate how Facebook’s platforms are performing. The recent 43% year-over-year bump in revenue per user shows that Facebook could have a lot left in the tank.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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Updates to Section 7 of the Developer Policies – Facebook Gaming Policies

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We have updated Section 7 of the Developer Policies effective immediately. No change is required from the developers’ end, only awareness about these changes.

As part of our continuous focus on improving developers’ experience, we have made some updates to the Section 7 of the Developer Policies which covers all Facebook Gaming Products, such as Web Games on Facebook.com, Instant Games and Cloud Games. As part of this update we have removed outdated policies, and streamlined the language and structure of Section 7 to better reflect the existing state of our Facebook Gaming Products. We have also reorganized some policies under the Quality Guidelines. These updates do not introduce any product change, nor do they include any new requirements for developers.

Please review the updated Section 7 to familiarize yourself with the updated content structure.

First seen at developers.facebook.com

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Creating Apps with App Use Cases

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With the goal of making Meta’s app creation process easier for developers to create and customize their apps, we are announcing the rollout of an updated process using App Use Cases instead of the former product-focused process. App Use Cases will enable developers to quickly create apps by selecting the use case that best represents their reason for creating an app.

Currently, the product-focused app creation process requires developers to select an app type and individually request permission to API endpoints. After listening to feedback from developers saying this process was, at times, confusing and difficult to navigate, we’re updating our approach that’s based on App Use Cases. With App Use Cases, user permissions and features will be bundled with each use case so developers can now confidently select the right data access for their needs. This change sets developers up for success to create their app and navigate app review, ensuring they only get the exact data access they need to accomplish their goals.

Starting today Facebook Login will be the first use case to become available to developers. This will be the first of many use cases that will be built into the app creation process that will roll out continually in 2023. For more information please reference our Facebook Login documentation.

First seen at developers.facebook.com

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Understanding Authorization Tokens and Access for the WhatsApp Business Platform

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The WhatsApp Business Platform makes it easy to send WhatsApp messages to your customers and automate replies. Here, we’ll explore authentication using the Cloud API, hosted by Meta.

We’ll start with generating and using a temporary access token and then replace it with a permanent access token. This tutorial assumes you’re building a server-side application and won’t need additional steps to keep your WhatsApp application secrets securely stored.

Managing Access and Authorization Tokens

First, let’s review how to manage authorization tokens and safely access the API.

Prerequisites

Start by making sure you have a developer account on Meta for Developers. You’ll also need WhatsApp installed on a mobile device to send test messages to.

Creating an App

Before you can authenticate, you’ll need an application to authenticate you.

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Once you’re signed in, you see the Meta for Developers App Dashboard. Click Create App to get started.

Next, you’ll need to choose an app type. Choose Business.

After that, enter a display name for your application. If you have a business account to link to your app, select it. If not, don’t worry. The Meta for Developers platform creates a test business account you can use to experiment with the API. When done, click Create App.

Then, you’ll need to add products to your app. Scroll down until you see WhatsApp and click the Set up button:

Finally, choose an existing Meta Business Account or ask the platform to create a new one and click Continue:

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And with that, your app is created and ready to use. You’re automatically directed to the app’s dashboard.

Note that you have a temporary access token. For security reasons, the token expires in less than 24 hours. However, you can use it for now to test accessing the API. Later, we’ll cover how to generate a permanent access token that your server applications can use. Also, note your app’s phone number ID because you’ll need it soon.

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Click the dropdown under the To field, and then click Manage phone number list.

In the popup that appears, enter the phone number of a WhatsApp account to send test messages to.

Then, scroll further down the dashboard page and you’ll see an example curl call that looks similar to this:

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curl -i -X POST https://graph.facebook.com/v13.0//messages -H 'Authorization: Bearer ' -H 'Content-Type: application/json' -d '{ "messaging_product": "whatsapp", "to": "", "type": "template", "template": { "name": "hello_world", "language": { "code": "en_US" } } }'

Note that the Meta for Developers platform inserts your app’s phone number ID and access token instead of the and placeholders shown above. If you have curl installed, paste the command into your terminal and run it. You should receive a “hello world” message in WhatsApp on your test device.

If you’d prefer, you can convert the curl request into an HTTP request in your programming language by simply creating a POST request that sets the Authorization and Content-Type headers as shown above, including the JSON payload in the request body.

Since this post is about authentication, let’s focus on that. Notice that you’ve included your app’s access token in the Authorization header. For any request to the API, you must set the Authorization header to Bearer .

Remember that you must use your token instead of the placeholder. Using bearer tokens will be familiar if you’ve worked with JWT or OAuth2 tokens before. If you’ve never seen one before, a bearer token is essentially a random secret string that you, as the bearer of the token, can present to an API to prove you’re allowed to access it.

Failure to include this header causes the API to return a 401 Unauthorized response code.

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Creating a Permanent Access Token

Knowing that you need to use a bearer token in the Authorization header of an HTTP request is helpful, but it’s not enough. The only access token you’ve seen so far is temporary. Chances are that you want your app to access the API for more than 24 hours, so you need to generate a longer-lasting access token.

Fortunately, the Meta for Developers platform makes this easy. All you need to do is add a System User to your business account to obtain an access token you can use to continue accessing the API. To create a system user, do the following:

  • Go to Business Settings.

  • Select the business account your app is associated with.
  • Below Users, click System Users.
  • Click Add.
  • Name the system user, choose Admin as the user role, and click Create System User.
  • Select the whatsapp_business_messaging permission.
  • Click Generate New Token.
  • Copy and save your token.

Your access token is a random string of letters and numbers. Now, try re-running the earlier request using the token you just created instead of the temporary one:

curl -i -X POST https://graph.facebook.com/v13.0//messages -H 'Authorization: Bearer ' -H 'Content-Type: application/json' -d '{ "messaging_product": "whatsapp", "to": "", "type": "template", "template": { "name": "hello_world", "language": { "code": "en_US" } } }'

Your test device should receive a second hello message sent via the API.

Best Practices for Managing Access Tokens

It’s important to remember that you should never embed an App Access Token in a mobile or desktop application. These tokens are only for use in server-side applications that communicate with the API. Safeguard them the same way you would any other application secrets, like your database credentials, as anyone with your token has access to the API as your business.

If your application runs on a cloud services provider like AWS, Azure, GCP, or others, those platforms have tools to securely store app secrets. Alternatively there are freely-available secret stores like Vault or Conjur. While any of these options may work for you, it’s important to evaluate your options and choose what works best for your setup. At the very least, consider storing access tokens in environment variables and not in a database or a file where they’re easy to find during a data breach.

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Conclusion

In this post, you learned how to create a Meta for Developers app that leverages the WhatsApp Business Platform. You now know how the Cloud API’s bearer access tokens work, how to send an access token using an HTTP authorization header, and what happens if you send an invalid access token. You also understand the importance of keeping your access tokens safe since an access token allows an application to access a business’ WhatsApp messaging capabilities.

Why not try using the Cloud API, hosted by Meta if you’re considering building an app for your business to manage WhatsApp messaging? Now that you know how to obtain and use access tokens, you can use them to access any endpoint in the API.

First seen at developers.facebook.com

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