Facebook (NASDAQ:FB) stock stumbled over the last week, resulting in a rare pullback for the social media giant. Mark Zuckerberg’s billion-dollar juggernaut halted all news-related content from its platform in Australia before reversing the decision a few days later.
The dispute between the Australian government and Facebook is because of proposed legislation that will require the social media giant to pay Australians publishers for any piece of news displayed or linked to on their sites. However, the social media giant reconsidered after the government agreed to media code amendments.
It’s not a massive headache. However, it could become one if more governments step up and start regulating Big Tech. The ripple effect will be massive for the company. Wedbush Securities’ Daniel Ives has said the development has “contained implications.” However, he does not see any major effect on Wall Street’s opinion of the company for now.
For traders, though, this is a massive opportunity in my eyes. Due to the political implications of its recent moves, Facebook stock is now trading at an 18% discount from its 52-week high of nearly $305.
According to Refinitiv, the 12-month average consensus price target among 46 analysts for Facebook stock is $338 per share. That indicates a 31% potential upside.
It would also be unwise to ignore the company’s stellar operating performance, with three quarterly consecutive earnings beats. Even though Facebook faces stiff competition from other platforms, it remains the biggest social network worldwide. It has approximately 2.8 billion monthly active users as of the fourth quarter of 2020.
Any way you slice it, it’s the firm industry leader in the social media space, and one that you should add to your portfolio whenever shares shed some value.
Facebook Stock Is a Can’t-Miss Opportunity
Since its mid-2012 IPO, Facebook stock is up almost 600%. However, in the last year, Facebook stock has had the slowest growth among all the FAANG stocks. Incidentally, the social media company is trading at a price-sales of 8.8x. Apart from Amazon (NASDAQ:AMZN), it’s the cheapest stock of the five tech giants. Many will be surprised by this development.
For several years, it was a given that Facebook would always do well due to its preeminence and asset-light model. In fact, more than any other social media company out there, Facebook is aggressive when it comes to making money through selling ads on social media websites and mobile applications. This is the main source of the company’s revenue and has been growing exponentially in the last five years.
Nevertheless, Facebook did not sit on its haunches and rest on its laurels. Instead, through several mergers and acquisitions, the company has become the world’s dominant personal social networking service. The company’s acquisitions of Instagram, WhatsApp, and Oculus support this strategy.
But all of these initiatives are perhaps the main reason why investors are now skeptical of putting their money in Facebook stock. Members of Congress are coming down hard on Big Tech giants like Facebook and Twitter (NYSE:TWTR). A day doesn’t go by when we don’t see or hear a debate on free speech involving Facebook, often in a negative light. Looking ahead, this will become the major cause of concern of investors, more than operating performance and inorganic growth.
Is it Worth the Risk?
As a general rule of thumb, I believe you should always purchase Facebook stock whenever there is a dip. Facebook is the go-to place for advertising. And you shouldn’t expect that to change anytime soon.
However, concerns regarding the geopolitical ramifications of its platforms are huge. I will not take much time to go into the Cambridge Analytica fiasco and its implications on the 2016 U.S. presidential election. Meanwhile, earlier this year, Facebook became embroiled in another controversy. It banned former President Donald Trump following the insurrection of the U.S. Capitol in January.
Due to the ubiquitous influence on our lives, Facebook will continue to find itself in the crosshairs of political controversies for a long time to come. I believe that comes with the territory. Having said that, several social media giants, particularly Facebook, are becoming too-big-to-fail case studies.
That’s not to say the regulatory risk is to be ignored. However, I believe it’s not a large enough problem for Facebook stock to become unattractive at this point.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
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