The stock will come back, just as Wells Fargo, United Airlines, and Intel stock came back after their scandals.
Facebook in particular will come back because there is no alternative social network with nearly as many people on it. The fundamentals of the business aren't really at risk -- most of the users will stay. The impact of potential privacy-related regulation is already priced in to a large extent because everyone already knew that GDPR was going to happen before this latest scandal broke, and Facebook was already prepared to comply with it. I doubt the US Congress in its current state would pass anything as strict as that.
It's true that many companies come back from scandal but it really depends on the impact to the bottom line. Chipotle had tremendous negative press years ago from food poisoning issues and hasn't recovered since. Even though the number of instances are in the single digits compared to millions of burritos served on a monthly basis.
With social media boycott campaigns it's hard to separate the noise from impact on the bottom line but with recent stories of Uber and what was occurring behind the scenes, the #DeleteUber campaign actually did have a negative impact on the bottomline that was felt and was definitely a huge driver for the board moving to remove Travis which is underreported as everyone instead focuses on the drama that occurred as that sells as a better story from the press side.
With Facebook it will really be about how many people truly delete Facebook.
The difference of course is that every Uber user was generating significantly more revenue on average than the avg Facebook user, so the number of users that delete Facebook would have to be much more significant.
Also interesting, is what is the global response. Is this localized to the US, are many people globally doing the same thing?
If it doesn't impact the bottom line through a massive amount of users deleting, then the stock will bounce back well before the next quarterly earnings report.
Why is a social network needed. Maybe because I am mostly a loner so I don't get it. I was on Facebook for few years as more people that I knew got on it just made get off it.
People will now be looking to jump and developers just got a huge motivation to build alternatives. Facebook will survive for a while, but I think we may be seeing their high water mark.
facebook is no longer filling the need so an opening is created for some young upstart to fill and draw away its user base, the larger the gap the more potential there is for the next gen to _myspace_ facebook
Why do we need a social network with so many people on it? What is the unique utility of Facebook? The ability to monitor and feel a vague sense of presence from the periphery of your social sphere?
I think the scandals will keep coming, the media will keep banging the drum, and I think people will demand regulation. A few techie libertarians won’t even be heard amidst that noise.
People already have had serious reservations about how fast things have been changing, and if you think that death by robot car and privacy violation by social media isn’t going to create a backlash, you’re not reading your history. It won’t help the tech sector that “old media” has everything to gain by keeping this dripfeed going.
This is a first wave, and while it will recede, there are more and bigger waves to come.
Facebook isn't going to disappear, but the company's valuation has fast growth baked in the cake.
We're already seeing dramatic deterioration in DAUs and minutes per user.
This episode will cause a few users to leave Facebook completely, but many more will use it less.
And that deceleration in the growth rate will need to be offset with an acceleration in earnings and cash flow for the stock price to increase from here.
> the company's valuation has fast growth baked in
That used to be the case. It's trading at a particularly unusual discount today in fact, on a growth to valuation metric. It's radically superior to Amazon on that front. It's better than Google. And it's dramatically better than Microsoft (which barely has any growth).
Facebook is trading for ~23 times likely 2018 earnings. And perhaps 17 or 18 times 2019 earnings.
Google has half the growth rate of Facebook, with a higher multiple (messy earnings statements the past year, but it's reasonably around 30 times 2018 likely earnings).
Microsoft has barely grown earnings for a decade. Their sales growth is single digits. ~30 PE ratio.
Amazon? Ha.
Netflix? Ha.
Cisco has had a contracting business for years on the top line. Profit has also declined. They're being granted a ~20-21 PE ratio on the basis of zero growth. That's barely below what Facebook is getting for considerable growth.
Or take Activision, trading for ~55-60 times earnings, with something around 1/5th the growth of Facebook.
Facebook has a PE ratio a lot closer to Oracle, which has a stagnant business that hasn't increased earnings in years.
Even pathetic Coca Cola, which has a collapsing business (years of sales declines), is trading for ~30 times earnings.
McDonald's which has a business that has been contracting for years, is trading for ~25 times earnings.
Facebook is cheap in just about every way compared to the broad market and compared to most slow-growth blue chips.
Most people i've seen move away from facebook ended up in instagram and whatsapp. So i'm not worried for the stock in the long term. They do however need to prepare for the post-instragram era. Not sure what it's going to be.
A lot of commentary here (not all) seems to miss one critical point: what is the inherent value of Facebook to its users, and has THAT been recently degraded? Controversy aside, this will be the big factor behind an exodus from Facebook, and I would argue that for months if not a year or more, Facebook has ceased to provide value to an enormous portion of its user base.
If by users you mean the people with Facebook profiles, then the value to them doesn't matter, only engagement matters, being addictive and depressing is a winning strategy here, at least short-term. What matters is the value of Facebook to its customers. If users lose touch with the platform, consume less ads, and yield less data, then that will matter to Facebook.
[+] [-] twblalock|8 years ago|reply
Facebook in particular will come back because there is no alternative social network with nearly as many people on it. The fundamentals of the business aren't really at risk -- most of the users will stay. The impact of potential privacy-related regulation is already priced in to a large extent because everyone already knew that GDPR was going to happen before this latest scandal broke, and Facebook was already prepared to comply with it. I doubt the US Congress in its current state would pass anything as strict as that.
[+] [-] raiyu|8 years ago|reply
With social media boycott campaigns it's hard to separate the noise from impact on the bottom line but with recent stories of Uber and what was occurring behind the scenes, the #DeleteUber campaign actually did have a negative impact on the bottomline that was felt and was definitely a huge driver for the board moving to remove Travis which is underreported as everyone instead focuses on the drama that occurred as that sells as a better story from the press side.
With Facebook it will really be about how many people truly delete Facebook.
The difference of course is that every Uber user was generating significantly more revenue on average than the avg Facebook user, so the number of users that delete Facebook would have to be much more significant.
Also interesting, is what is the global response. Is this localized to the US, are many people globally doing the same thing?
If it doesn't impact the bottom line through a massive amount of users deleting, then the stock will bounce back well before the next quarterly earnings report.
[+] [-] stochastic_monk|8 years ago|reply
I don’t like being a product. Yes, Google products still make money off me, but I try to minimize it, and they’re at least slightly less callous.
[+] [-] xbmcuser|8 years ago|reply
[+] [-] OrganicMSG|8 years ago|reply
[+] [-] tanilama|8 years ago|reply
[+] [-] itronitron|8 years ago|reply
[+] [-] asteli|8 years ago|reply
It's definitely not about social fulfillment.
[+] [-] Erlangolem|8 years ago|reply
People already have had serious reservations about how fast things have been changing, and if you think that death by robot car and privacy violation by social media isn’t going to create a backlash, you’re not reading your history. It won’t help the tech sector that “old media” has everything to gain by keeping this dripfeed going.
This is a first wave, and while it will recede, there are more and bigger waves to come.
[+] [-] panarky|8 years ago|reply
We're already seeing dramatic deterioration in DAUs and minutes per user.
This episode will cause a few users to leave Facebook completely, but many more will use it less.
And that deceleration in the growth rate will need to be offset with an acceleration in earnings and cash flow for the stock price to increase from here.
[+] [-] adventured|8 years ago|reply
That used to be the case. It's trading at a particularly unusual discount today in fact, on a growth to valuation metric. It's radically superior to Amazon on that front. It's better than Google. And it's dramatically better than Microsoft (which barely has any growth).
Facebook is trading for ~23 times likely 2018 earnings. And perhaps 17 or 18 times 2019 earnings.
Google has half the growth rate of Facebook, with a higher multiple (messy earnings statements the past year, but it's reasonably around 30 times 2018 likely earnings).
Microsoft has barely grown earnings for a decade. Their sales growth is single digits. ~30 PE ratio.
Amazon? Ha.
Netflix? Ha.
Cisco has had a contracting business for years on the top line. Profit has also declined. They're being granted a ~20-21 PE ratio on the basis of zero growth. That's barely below what Facebook is getting for considerable growth.
Or take Activision, trading for ~55-60 times earnings, with something around 1/5th the growth of Facebook.
Facebook has a PE ratio a lot closer to Oracle, which has a stagnant business that hasn't increased earnings in years.
Even pathetic Coca Cola, which has a collapsing business (years of sales declines), is trading for ~30 times earnings.
McDonald's which has a business that has been contracting for years, is trading for ~25 times earnings.
Facebook is cheap in just about every way compared to the broad market and compared to most slow-growth blue chips.
[+] [-] bsaul|8 years ago|reply
[+] [-] toni_erika|8 years ago|reply
[+] [-] arthurofbabylon|8 years ago|reply
[+] [-] gnode|8 years ago|reply
[+] [-] killjoywashere|8 years ago|reply
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