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Is Facebook Stock a Buy? | The Motley Fool

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is-facebook-stock-a-buy?-|-the-motley-fool

The social media company remains a polarizing investment.

Key Points

  • Apple’s iOS update is throttling the growth of Facebook’s ad business.
  • But Facebook’s family of apps continue to gain new users.
  • The stock still looks undervalued relative to its growth potential.

Facebook (NASDAQ:FB) posted its third-quarter earnings on Oct. 25. The social media giant’s revenue rose 35% year-over-year to $29.01 billion, but still missed estimates by $510 million. Its earnings increased 19% to $3.22 to per share, which beat expectations by a nickel.

Facebook’s stock rose slightly after the report, and remains up about 20% for the year. The market’s calm reaction to Facebook’s revenue miss was starkly different from Snap‘s (NYSE:SNAP) post-earnings crash on Oct. 22.

Facebook CEO Mark Zuckerberg.

Image source: Facebook.

Let’s see why Facebook held onto its gains after its mixed earnings report, how the company plans to address its biggest challenges and controversies, and if its stock is still worth buying as a long-term investment.

Stable growth amid platform challenges

Last quarter, Facebook warned that Apple‘s (NASDAQ:AAPL) iOS update, which allowed users to opt out of data tracking features across all apps, could throttle its ad revenue growth in the second half of the year. But despite those challenges, Facebook still grew its ad revenue 33% year-over-year on top of the segment’s 22% growth a year earlier.

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During the conference call, chief operating officer Sheryl Sandberg called Apple’s iOS update the “biggest” headwind it faced in the third quarter, while CEO Mark Zuckerberg called out “intense” competition from Apple’s iMessage and ByteDance‘s TikTok as other emerging challenges.

Meanwhile, Facebook’s “others” revenue soared 195% as it sold more Oculus Quest headsets and Portal smart screens. This business accounted for less than 3% of Facebook’s revenue during the quarter, but its growth still boosted its total revenue growth by about two percentage points.

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Facebook expects its revenue to rise 12% to 21% year-over-year in the fourth quarter, which would represent its slowest growth in more than a year:

Growth (YOY)

Q3 2020

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Q4 2020

Q1 2021

Q2 2021

Q3 2021

Revenue

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22%

22%

48%

56%

35%

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EPS

28%

57%

93%

101%

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19%

Source: Facebook. YOY = Year-over-year.

CFO Dave Wehner blames that slowdown on the “significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS 14 changes and macroeconomic- and COVID-related factors.”

Wehner also expects the “others” segment to face a tough year-over-year comparison to the launch of the Quest 2 headset at the end of 2020.

But Facebook continues to connect people

Facebook’s near-term advertising growth could be bumpy, but it’s still continuously gaining more users. In the third quarter, its monthly active people (MAP) across Facebook, Messenger, Instagram, and WhatsApp increased 12% year-over-year to 3.58 billion — or nearly half of the world’s population — as its family average revenue per person (ARRP) grew 21% to $8.18.

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Those growth rates held steady over the past year, even as Facebook grappled with a whistleblower crisis, a streak of negative headlines, and regulatory threats to break up the company.

Growth (YOY)

Q3 2020

Q4 2020

Q1 2021

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Q2 2021

Q3 2021

MAP

14%

14%

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15%

12%

12%

Family ARRP

7%

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17%

29%

37%

21%

Source: Facebook. YOY = Year-over-year.

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During the call, Zuckerberg called the whistleblower reports a “coordinated effort to selectively use leaked documents to paint a false picture of our company,” and stated that “polarization started rising in the U.S. before I was born.”

Zuckerberg said Facebook would continue to ramp up its investments in safety and security to protect its users, but noted that it couldn’t fix the underlying polarization “by itself” if social media wasn’t the root cause of those issues.

An emphasis on the metaverse and bigger buybacks

Instead of focusing too heavily on the ad business’ temporary headwinds and controversies, Facebook emphasized the expansion of its metaverse business with new VR headsets, experiences, and upcoming AR devices.

Starting in the fourth quarter, Facebook will start breaking out the financials for its “Facebook Reality Lab”, which includes its VR and AR products, to give investors a clearer view of its growth potential beyond targeted ads.

Facebook also announced a $50 billion increase to its stock buyback plan, which still had $8 billion remaining at the end of September. However, a lot of those buybacks will likely be spent on offsetting its dilution from stock bonuses instead of boosting its earnings per share (EPS). For example, Facebook bought back $24.5 billion in shares in the first nine months of 2021, but its share count only dipped 0.2% year-over-year on a diluted basis.

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Is Facebook’s stock worth buying?

Facebook is growing a lot slower than Snap, and it faces many of the same headwinds. However, Facebook’s stock didn’t crash after its earnings report because it was already trading at much lower valuations than Snap.

Earlier this year, Snap had conditioned investors to expect a minimal impact from Apple’s iOS update, with a rosy long-term guidance of 50% annual revenue growth over the next few years. Those expectations caused its stock to trade at over 30 times this year’s sales before its revenue miss, and soft revenue guidance for the fourth quarter torpedoed its stock.

Meanwhile, Facebook still looks reasonably valued at 21 times forward earnings and less than eight times this year’s sales. Therefore, Facebook’s downside potential should be limited at these levels — and it could climb much higher if it weathers the near-term platform and regulatory headwinds.

 

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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Leo Sun owns shares of Apple and Snap Inc. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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Facebook Messenger Is Launching a Split Payments Feature for Users to Quickly Share Expenses

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Facebook Messenger Is Launching a Split Payments Feature for Users to Quickly Share Expenses

Meta has announced the arrival of a new Split Payments feature in Facebook Messenger. This feature, as the name suggests, will let you calculate and split expenses with others right from Facebook Messenger. This feature essentially looks to bring an easier method to share the cost of bills and expenses — for example, splitting a dinner bill with friends. Using this new Split Payment feature, Facebook Messenger users will be able to split bills evenly or modify the contribution for each individual, including their own.

The company took to its blog post to announce the new Split Payment feature in Facebook Messenger. 9to5Mac reports that this new bill splitting feature is still in beta and will be exclusive to US users at first. The rollout will begin early next week. As mentioned, it will help users share the cost of bills, expenses, and payments. This feature is especially useful for those who share an apartment and need to split the monthly rent and other expenses with their mates. It could also come handy at a group dinner with many people.

With Split Payments, users can add the number of people the expense needs to be divided with and, by default, the amount entered will be divided in equal parts. A user can also modify each person’s contribution including their own. To use Split Payments, click the Get Started button in a group chat or the Payments Hub in Messenger. Users can modify the contribution in the Split Payments option and send a notification to all the users who need to make payments. After entering a personalised message and confirming your Facebook Pay details, the request will be sent and viewable in the group chat thread.

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Once someone has made the payment, you can mark their transaction as ‘completed’. The Split Payment feature will automatically take into account your share as well and calculate the amount owed accordingly.


For the latest tech news and reviews, follow Gadgets 360 on Twitter, Facebook, and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel.

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Tasneem Akolawala is a Senior Reporter for Gadgets 360. Her reporting expertise encompasses smartphones, wearables, apps, social media, and the overall tech industry. She reports out of Mumbai, and also writes about the ups and downs in the Indian telecom sector. Tasneem can be reached on Twitter at @MuteRiot, and leads, tips, and releases can be sent to tasneema@ndtv.com.

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Facebook Owner Meta Launches New Platform, Safety Hub to Protect Women in India

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Meta (formerly Facebook) on Thursday announced a slew of steps to protect woman users on its platform, including the launch of StopNCII.org in India that aims to combat the spread of non-consensual intimate images (NCII).

Meta has also launched the Women’s Safety Hub, which will be available in Hindi and 11 other Indian languages, that will enable more women users in India to access information about tools and resources that can help them make the most of their social media experience, while staying safe online.

This initiative by Meta will ensure women do not face a language barrier in accessing information Karuna Nain, director (global safety policy) at Meta Platforms, told reporters here.

“Safety is an integral part of Meta’s commitment to building and offering a safe online experience across the platforms and over the years the company has introduced several industry leading initiatives to protect users online.

“Furthering our effort to bolster the safety of users, we are bringing in a number of initiatives to ensure online safety of women on our platforms,” she added.

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StopNCII.org is a platform that aims to combat the spread of non-consensual intimate images (NCII).

“It gives victims control. People can come to this platform proactively, hash their intimate videos and images, share their hashes back with the platform and participating companies,” Nain said.

She explained that the platform doesn’t receive any photos and videos, and instead what they get is the hash or unique digital fingerprint/unique identifier that tells the company that this is a known piece of content that is violating. “We can proactively keep a lookout for that content on our platforms and once it”s uploaded, our review team check what”s really going on and take appropriate action if it violates our policies,” she added.

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In partnership with UK Revenge Porn Helpline, StopNCII.org builds on Meta’s NCII Pilot, an emergency programme that allows potential victims to proactively hash their intimate images so they can”t be proliferated on its platforms.

The first-of-its-kind platform, has partnered with global organisations to support the victims of NCII. In India, the platform has partnered with organisations such as Social Media Matters, Centre for Social Research, and Red Dot Foundation.

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Nain added that the company is hopeful that this becomes an industrywide initiative, so that victims can just come to this one central place to get help and support and not have to go to each and every tech platform, one by one to get help and support.

Also, Bishakha Datta (executive editor of Point of View) and Jyoti Vadehra from Centre for Social Research are the first Indian members in Meta”s Global Women”s Safety Expert Advisors. The group comprises 12 other non-profit leaders, activists, and academic experts from different parts of the world and consults Meta in the development of new policies, products and programmes to better support women on its apps.

“We are confident that with our ever-growing safety measures, women will be able to enjoy a social experience which will enable them to learn, engage and grow without any challenges.

“India is an important market for us and bringing Bishakha and Jyoti onboard to our Women”s Safety Expert Advisory Group will go a long way in further enhancing our efforts to make our platforms safer for women in India,” Nain said.

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Facebook Adds New Trend Insights in Creator Studio, Which Could Help Shape Your Posting Strategy

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Facebook’s looking to provide more content insight within Creator Studio with the rollout of a new ‘Inspiration Hub’ element, which highlights trending content and hashtags within categories related to your business Page.

Facebook Inspiration Hub

As you can see in these screenshots, posted by social media expert Matt Navarra, when it becomes available to you, you’ll be able to access the new Inspiration Hub from the Home tab in Creator Studio.

At the right side of the screen, you can see the first of the new insights, with trending hashtags and videos from the last 24 hours, posted by Pages similar to yours, displayed above a ‘See more’ prompt.

When you tap through to the new hub, you’ll have a range of additional filters to check out trending content from across Facebook, including Page category, content type, region, and more.

Facebook Inspiration Hub

That could be hugely valuable in learning what Facebook users are responding to, and what people within your target market are engaging with in the app.

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The Hub also includes insights into trending hashtags, within your chosen timeframe, which may further assist in tapping into trending discussions.

Facebook Inspiration Hub

How valuable hashtags are on Facebook is still up for debate, but you’ll also note that you can filter the displayed results by platform, so you can additionally display Instagram hashtag trends as well, which could be very valuable in maximizing your reach.

Much of this type of info has been available within CrowdTangle, Facebook’s analytics platform for journalists, for some time, but not everyone can access CrowdTangle data, which could make this an even more valuable proposition for many marketers.

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Of course, overall performance really relates to your own creative, and thinking through the action that you want your audience to take when reading your posts. But in terms of detecting new content trends, including hashtag usage, caption length, videos versus image posts, and more, there’s a lot that could be gleaned from these tools and filters.

It’s a significant analytics addition – we’ve asked Facebook for more info on the rollout of the new option, and whether it’s already beyond test mode, etc. We’ll update this post if/when we hear back.

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