Why I Am Buying Facebook Stock (Should You?) | Summary and Q&A

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August 13, 2018
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Ryan Scribner
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Why I Am Buying Facebook Stock (Should You?)

TL;DR

Facebook stock has faced challenges but remains a strong investment due to the growth potential of Instagram, reasonable valuation compared to competitors, and strong financial fundamentals.

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Questions & Answers

Q: What has been the recent performance of Facebook stock?

Facebook stock experienced a decline in value due to the Cambridge Analytica scandal, followed by a notable rally, and then a decline after a revenue miss. However, the stock remains a strong investment opportunity.

Q: What is the growth potential of Instagram?

Instagram is predicted to surpass Facebook in popularity in the coming years, particularly among younger demographics. With various opportunities for monetization, Instagram has significant untapped potential for revenue growth.

Q: How does Facebook's valuation compare to Google's?

Facebook's valuation is lower than Google's, making it a more reasonably priced investment. The price-to-earnings ratio, forward price-to-earnings ratio, and price-to-earnings-to-growth ratio all favor Facebook over Google.

Q: What are the financial fundamentals of Facebook?

Facebook has a strong balance sheet, with a substantial amount of cash and no long-term debt. Their lean business model and healthy financial position contribute to a positive investment outlook.

Summary & Key Takeaways

  • Facebook stock experienced a decline due to the Cambridge Analytica scandal, followed by a rapid rally and a subsequent slide in stock value.

  • The popularity of Instagram among younger generations contributes to the growth potential of the Facebook platform.

  • Facebook's valuation is comparatively lower than that of its main competitor, Google, making it an attractive investment.

  • Facebook has a strong balance sheet with significant cash reserves and minimal debt, making it financially stable.

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