Mr-Wallstreet Friday Stock Report Featuring FaceBook (FB)

12/05/2018
Facebook (FB), $137.93
HQ: Menio Park, CA, USA_
Morning Star: 4 of 5 stars
Piotroski F: 6 strong
Altman Z: 22 safe

I found this company by looking and asking what people are doing on their phone. More often than not they say checking FB. I then asked a few local small businesses how they advertise and they usually say word of mouth and FB. This intrigued me and I wanted to know if this company is worth investing in.
There are approximately 16 big investors currently owning the stock and seven of the 16 either added or entered a new position in the third quarter of 2018. This made me even more confident in FB.

This company is in the social media industry and relies on user growth along with advertising. Some of the competitors are JD.com(JD), Alphabet (GOOGL), and Twitter (TWTR). FB ranks in the top three in the industry.
FB helps people connect with each other and the world. FB even claims “We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.” If you believe in this concept and find yourself using FB and plan to continue to use FB, maybe you should also consider owning a piece of the company.

Facebook has a brand that everyone is familiar with. People no longer ask for a phone number they ask for your FB page. That is what I call a strong brand which I believe is not going away any time soon.

As always, I wanted to check the growth rates to confirm my finding. The Earnings, Book Value, and Operating Cash have all grown over 25% along with Sales for the last seven years. It would be reasonable to say that future growth rate should be at least 15% to be conservative.

The founder and CEO is Mark Zuckerberg. Zuckerberg believes, “There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future. The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on.” He also claims, “we don't build services to make money; we make money to build better services”. FB has no debt and has been growing its assets by double digits. I would say Zuckerberg has been doing a good job.

Let’s look at value. If FB Earnings are $6.63 today and grows at 15% growth rate we get future earnings in 5yrs of $13.34 per share. Multiplied by a conservative PE ratio of 15, and I get a five year future price of $402. At todays price of $140 that a 23% annually return.

Some of the possible risk that can change the outlook.

1. People stop using FB for social media. As of now FB still remains the leader and we will have to keep an eye if twitter or snap takes users away.
2. Government starts to regulate FB's user's content. This would not only be a big catalyst for FB but every media company and the US in itself.
3. FB continues to get targeted by hackers. FB will have to pay fines and hire more security professional which will effect the growth rate of FB.
4. FB loses trust of there users and will result back to risk number 1.
   There is always risk dealing with technology stocks. If you buy this stock you should know when to take profit when you see less postings or you quit checking your own account.