Facebook is the global leading social network since its creation.
As a public company Facebook has been wildly successful currently boasting a market capitalization of approximately 542 billion USD. Facebook's high stock market valuation reflects both its stellar revenue growth and high profitability since 2012. Facebook's growth is largely due to its leading position in the market for internet advertising. The internet advertising industry has been growing with rates of approximately 20% in the last 5-6 years. In the last two years, however, the growth of internet advertising has slowed, however. And Facebook's revenue growth also is bound to slowdown markedly.
Yes, Facebook has launched a digital currency initiative called Libra, Facebook Marketplace for internet purchases and money transfers in a bid to find new avenues of growth. But it is well known it is very difficult to launch new highly successful products, as evidenced by the multiple failed attempts of various large, medium and small enterprises all over the world.
So I think Facebook's intrinsic valuation long-term is around 15% lower than its current market capitalization. I think my estimate correctly prices in the future growth prospects of Facebook. One of the largest revenue generators of Facebook is its Instagram property. But the interest in Instagram will also soon start showing saturation. Facebook will continue growing but at a significantly slower pace than before. Libra, Facebook's digital currency could prove very promising provided that Facebook manages to placate global financial regulators, that is central banks, and launch it as an efficient full service means of payments. However, I doubt global regulators will easily and freely permit an unregulated currency issued by a large private corporation like Facebook. The internet shopping tool of Facebook called Facebook Marketplace has better plausible chances of success. I can bet Facebook Marketplace could well take some market share from Amazon.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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