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Is Facebook A Buy In 2021?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsJan 15, 2021 04:53AM ET
www.investing.com/analysis/is-facebook-a-buy-in-2021-200555971
Is Facebook A Buy In 2021?
By Investing.com (Haris Anwar/Investing.com)   |  Jan 15, 2021 04:53AM ET
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The new year hasn’t provided a promising start for Facebook (NASDAQ:FB). The social media giant, mired in multiple controversies, is seeing its stock sink as its investment appeal diminishes after a robust rebound from the pandemic-induced plunge last March.

Facebook shares have fallen more than 8% this year, diverging from other mega tech stocks. Its shares closed yesterday at $245.64, about 18.5% lower than its August high.

Facebook Weekly Chart.
Facebook Weekly Chart.

The biggest risk keeping investors on the sidelines is related to multiple lawsuits the company is facing. Facebook was sued in December by U.S. anti-trust officials and a coalition of states that want to break up the company, terming its acquisitions of Instagram and WhatsApp unlawful. These deals, according to the government, were part of a campaign to illegally crush competition. 

The cases represent the biggest regulatory attack against Facebook in the company’s history. They follow the U.S. Justice Department’s October lawsuit against Alphabet's (NASDAQ:GOOGL) (NASDAQ:GOOG). Together, the Google and Facebook actions mark the most significant monopoly cases filed in the U.S. since the Justice Department sued Microsoft (NASDAQ:MSFT) in 1998, according to Bloomberg. Unlike the Google case, the Facebook complaints seek a court order to break up the company.

Besides these regulatory hurdles, the platform is also at the centre of political turmoil in the U.S. after it decided to block the accounts of President Donald Trump and of white supremacists in the wake of mob attacks on Capitol Hill last week. The move, which other social media giants followed, has irked millions of Trump supporters who are accusing Facebook CEO Mark Zuckerberg of taking a side in this political battle. 

According to an analysis in the Wall Street Journal:

“The issues have consumed Facebook for much of the Trump administration and are likely to persist for the near future, as it navigates competing criticism from some that it does too little to curb problematic content and from others that its moderation efforts veer into censorship.”

Change In Data Sharing Policies 

Right in the middle of this controversy, Facebook’s WhatsApp began alerting its 2 billion users last week that if they want to keep using the popular messaging app, they have to accept new terms about its data-sharing policies. 

Since 2016, WhatsApp has shared certain data with Facebook. But users previously had a chance to opt out of this. But starting Feb. 8, users will be prompted in the app to accept the updated terms in order to continue using WhatsApp.

According to some media reports, the change has triggered a wave of downloads of privacy-focused messaging apps, including Signal and Telegram, as users looked for alternatives to Facebook-owned WhatsApp. Tesla's (NASDAQ:TSLA) CEO Elon Musk also recommended his followers use Signal.

Signal saw approximately 7.5 million installs globally through the Apple (NASDAQ:AAPL) App Store and Google Play store between Jan. 6 and Jan. 10, according to CNBC.com, citing Sensor Tower data. That’s 43 times the number from the previous week. It is the highest weekly or even monthly install numbers for Signal in the app’s history. Meanwhile, Telegram saw 5.6 million downloads globally from Wednesday through Sunday, according to Apptopia.

Impact On Facebook Business

For long-term investors, the primary question is: How damaging could these headwinds be for the company, which is already seeing a substantial slowdown in its sales growth during the pandemic?

Many analysts, who have studied the recent regulatory challenges believe FB’s business model is strong enough and it’s unlikely that these issues could damage the company’s earnings potential.

"We believe Facebook’s virtual ownership of the social graph, strong competitive moat, and focus on the user experience position it to become an enduring blue-chip company built for the long term," J.P. Morgan analyst Doug Anmuth said in a recent note.

Anmuth, who has a $330 price target for Facebook, added:

"Facebook is in rarefied air across the combination of scale, growth and profitability, as the company’s massive reach and engagement continue to drive network effects, and its targeting abilities provide significant value to advertisers."

In a note, KeyBanc Capital Markets analyst Justin Patterson said a potential breakup of FB could take years given technical complexities, adding:

"Instead, we believe this will likely be resolved with another fine and additional scrutiny on future M&A."

Patterson has rated the stock overweight with a $340 price target.

Bottom Line

After the recent weakness, Facebook's multiple has become attractive and even lower than other companies, like Walmart (NYSE:WMT) or Coca-Cola (NYSE:KO), suggesting that a fair amount of regulatory risk is already built into the stock. As this sell-off accelerates, we find FB stock becoming an attractive buy for 2021, given the platform’s powerful ad appeal and its duoply status in the digital ad market with Google.

Is Facebook A Buy In 2021?
 

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Is Facebook A Buy In 2021?

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Comments (20)
PHEARLESS PHARAOH
PHEARLESS PHARAOH Jan 19, 2021 4:15PM ET
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It popped today but thats normal after a holiday. The chart hasnt changed, its still pointing down.I thik The real controversy is the people buying it... whats wrong with them!?
Ali Abdul
Ali Abdul Jan 16, 2021 9:37PM ET
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From the day facebook was created is only trouble came out, from people commiting suicide and broadcasting it live, to bullying to privacy issues.
Jose Soberanes
Jose Soberanes Jan 16, 2021 7:19PM ET
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A totaly UnAmerican company
Ryan Grandinetti
Ryan Grandinetti Jan 16, 2021 7:02PM ET
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once an alternative appears might be parler or signal, fb will go the way of MySpace quickly. Zuckerberg can manage his accounts in other countries but a sure fail here in the U.S. 150m Americans waiting for a new site etc & one will be created
Kory Cassell
Dorito Jan 15, 2021 12:00PM ET
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How many times did Zuckerbot lie under oath about censoring users...... yikes
Marc Ragasa
Marc Ragasa Jan 15, 2021 11:21AM ET
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lol. dont FB owns IG
Taylor Kaplan
Taylor Kaplan Jan 15, 2021 11:18AM ET
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Emotionally I want them to fail. As a business person, that stock is worth infinity since theyve bought the law and money printer.
Phil Kimmel
Phil Kimmel Jan 15, 2021 11:16AM ET
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Looks like a lot of trump trolls are out and about
Thomas Colton
Thomas Colton Jan 15, 2021 11:10AM ET
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If only it were true that Elon Musk would buy FB to shut it down
carlos gustavo merola
carlos gustavo merola Jan 15, 2021 11:04AM ET
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For sure right ? Censorship is cool
Mo Ali
Av8er31 Jan 15, 2021 11:04AM ET
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Social Media and News media are the real cause for all the division and violence, not only in the USA but around the world. They sow seeds of hate and division, and then censor for more control. I closed my FB 2 years ago, got banned from Twitter during the latest purge, and never going back. Social surveillance capitalism is really scary.
Red Riley
Red Riley Jan 15, 2021 11:04AM ET
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perfect post
Adam Bannister
Adam Bannister Jan 15, 2021 11:03AM ET
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Even if it were a good time to buy ill never buy facebook. Thats like buying a share of communism at this point
Artour Kassimov
art1997 Jan 15, 2021 11:03AM ET
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I short it, but because i thought it was national socialism stock, not a communist one. People often confuse those two formes of goverment. We dis not have true communist state, the closest one was Soviet Union.
BANG PHAM
BANG PHAM Jan 15, 2021 11:03AM ET
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I am shorting both TWTR and FB.
Moshe Maimon
Moshe Maimon Jan 15, 2021 10:03AM ET
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I am shorting FB!
ian Hawksworth
BigAl Jan 15, 2021 8:03AM ET
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I use facebook for business so its a shame what is happening. No one person should have the scope to influence people by censorship of voices that go against the narrative.
Gill Bill
Gill Bill Jan 15, 2021 8:03AM ET
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really.... because I got helped from a company of forex trading that helped me trade and that has helped my family....
ZM Qi
ZM Qi Jan 15, 2021 7:52AM ET
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As you said Tesla would be never a buy from your last year's articles because its p/e would be too high, but it kept shooting Moon, facebook should be "must be shut down ⬇️"
Ildikó Roth
Ildikó Roth Jan 15, 2021 7:12AM ET
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Why would any means of control and lie be a good investment?
Stacy Starner
Stacy Starner Jan 15, 2021 5:29AM ET
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They should be shut down garbage nothing but drama and censored speech typical united states media
Candy Man
Candy Man Jan 15, 2021 5:26AM ET
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Its too risky, the selloff is warrented. We are going to see more disruption of these companies, the tech giants. Litterally no one, including their own employees, is happy about the position and power these companies have and awareness is still rising. EU is also very angry about all the tax rev. That goes away.
Gerry Baurich
Gerry Baurich Jan 15, 2021 5:26AM ET
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This! Absolutely agree!
Gill Bill
Gill Bill Jan 15, 2021 5:26AM ET
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yes my friend. I have built-in forex trading.. and I have benefited a lot..
Luqman Firdaus
Luqman Firdaus Jan 15, 2021 4:54AM ET
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money $ 675.000
shamis khan
shamis khan Jan 15, 2021 4:54AM ET
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reason?
 
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