Facebook is still the dominant social network. For many it is the internet.
What about Facebook's future? Is Facebook currently valued at 516.83 bln. USD overvalued?
Actually, in the long run, 5-7 years from now, such a valuation seems reasonable if a strong competitor does not emerge? The large majority of people outside China who have access to internet are on Facebook. Facebook's main market - internet advertising is forecast to grow 17% in 2019. Yes, Facebook is richly valued at 8.77 trailing Price-to-Sales ratio. But unless a major competitor emerges that takes a large lion share of Facebook's revenue Facebook could well grow in its valuation. If the overall stock market falls 30-40%, which could well happen due to temporary overvaluation, Facebook's market capitalization could well decline temporarily to 250-300 billion USD or circa 40%.
But if no major competitor emerges or Facebook is not broken up, Facebook will again grow to 500 billion USD valuation. People still go to Facebook every day and its main market of internet advertising is forecast to grow by in excess of 10% to 2022. Facebook could well break into new markets like payment or dating. But the Facebook brand has such a huge following and customer loyalty that it is difficult to envision a new competitor quickly gaining ground on Facebook. But such an event should not be excluded. Having an internet site which is extremely popular is very good, but in internet the barriers to entry are low and a new wave could well disrupt Facebook, the same way social media disrupted the internet 12 years ago. But for now Facebook looks certain to continue to thrive in the next 5 years at least. One should not exclude US government intervention, but I think the US government would not risk threatening the freedom of speech or the main freedom upon which the USA is built.
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Petar
Vladimirov Posledovich is not liable for any investment losses incurred
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Kind regards,
Petar Posledovich
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