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Is Facebook a golden goose or just an egg?

People power is also Facebook (FB) power. With latest privacy data scandal, the FB stock had been on the downward trend since February 2018. Time spent by people on the social network has been dipping steadily as the company showed fewer viral videos. This means that in total, Facebook has roughly lost 50 million hours of usage every day.

In the recently completed fourth quarter, Facebook posted lower than expected earnings per share, due to the impact of U.S. tax law. A 14% year-over-year growth in daily active users and higher mobile advertising revenue drove total revenue higher by 47%. Most of the quarterly revenue came from advertisements.

Mark Zuckerberg, who has most of the voting stock on Facebook, was not able to lower capital expenditures, research and development expenses, and sales and marketing costs. Employees remained happy that there seem to be very fewer job cuts, thanks to the management, which lifted the headcount by 47% to 25,105 as of December 31, 2017.

Facebook’s cash was lowered during the quarter due to expenses related to acquisitions, purchase of property and marketable securities. Despite its current assets climbing by 41.2%, the company has been selling their intellectual property, including patents, trademarks, copyrights and business methodologies, which can be seen from a 25.7% drop in intangible assets.

The company, which hasn’t yet declared a dividend, has planned to retain the earnings for reinvesting it in core business or pay-off the $114 million debt. Facebook’s free cash flow climbed by 47.7% during the quarter, thanks to higher cash provided by operating activities.

Facebook stock had been on the downward trend since February 2018.
Picture Courtesy: Facebook

So will Facebook stock rise?

When taking into analysts’ recommendation trends, almost 17 analysts of the total 46 recommended a Strong Buy rating, and 25 rated a Buy rating. In the past four quarters, the company’s earnings topped estimates only twice.

When looking at the growth estimates, market analysts are expecting a 31.7% jump in the current quarter, with an annual growth of 36.4% in the current year and a 21.1% jump in the next year. However, looking ahead for the next five years, the Street sees a 26.9% growth, which is lesser than what consensus expected during this year, due to the competition faced by Facebook and recent data scandal.

Most of the sell-side analyst firms are sticking to Buy rating, hinting to the investors to purchase the shares. But a recent selloff has raised questions on how Cambridge Analytica has got 50 million worth of data without the users’ knowledge. In contrast, the 50 million data seems to be a mere 2% worth of data for Facebook.

The stock, which had been between $138.77 and $195.32 for the past 52 weeks, was down 9.05% during the past three months and down 12.14% since this year beginning. When comparing for the past 52 weeks, Facebook had risen 14.07%, while Nasdaq had climbed 23.63%.

The Street analysts believe that the recent sell-off of Facebook stock gives a buying opportunity.

Off lately, Facebook is seeing a fierce #deletefacebook hashtag where more and more people started deleting their accounts as Tesla’s (TSLA) Elon Musk and WhatsApp’s co-founder Brian Acton are stepping in against the social network. Instead of Facebook, Elon Musk prefers Instagram. The Street analysts believe that the recent sell-off of stock gives a buying opportunity.

Despite the sell-off, the analysts expect the company’s advertising revenue to grow higher in future as digital ad spending will rise from $228 billion in 2017 to $376 billion in 2021. Also, Zuckerberg is regulating the stock at regular intervals as known from the sale of 145,000 shares on March 20. In addition, several institutional investors and hedge funds have either lifted or reduced their position in the stock.

Investors, who are planning to buy Facebook, could keep in mind that the social media giant is just sticking to repurchases rather than paying dividends. As per analysts view, the future of Facebook remains certain, and there might be few changes or revisions going on for data. Let’s invest, wait and watch.

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