Missouri-based Wedgewood Partners presented its thoughts on Facebook (NASDAQ: FB) in its Q4 investor letter – you can download a copy here. The investment firm loves Facebook because the social network has a “vastly superior profitability metrics relative to its peers in the media and advertising industry” and the company’s “social platforms serve as very low-cost forms of user traffic and content.” The investor believes that Facebook has “plenty of room for growth in the years ahead” with “strong advertiser demand and healthy ROI along with” its ability to increase ads pricing. Here are Wedgewood’s comments about the social networking giant:
2018 was annus horribilis for Facebook. After seemingly surviving the public relations nightmare of the Cambridge Analytica scandal this past spring, the Company’s reputation and stock have been shredded since the summer. It’s hard to recall a greater circular firing squad fusillade aimed squarely at Facebook’s C-suite, board of directors and business model from consumer outrage over security and privacy breaches, government regulatory threats, and media exposés, plus spiking expense growth, lowered operating guidance, and hard-to-measure platform transitions. Yet, the Company’s monopoly-like business model remains remarkably intact.
Facebook’s scale across its platforms, including Instagram and WhatsApp, continues to drive a “virtuous cycle” of user engagement and therefore incredibly low-cost content creation. Some recent monthly active user (MAU) stats include 2.27 billion users on Facebook, as well as 1.50 billion daily active users (DAUs), as of September 30, 2018. Additionally, there are 1.5 billion users on WhatsApp as of January 2018, and Instagram MAUs cross the billion-user mark as well. Watch (the Company’s new video offering) has already grown to 75 million DAUs and 400 million MAUs. In addition, Facebook continues to report stable user engagement (as measured by DAU and MAU) at 71%.
Facebook continues to exhibit vastly superior profitability metrics relative to its peers in the media and advertising industry. Facebook’s value proposition remains unique and defensible relative to peers, which we expect will enable the Company to generate industry leading returns on invested assets for years to come. This value proposition is focused on providing advertising customers with highly attractive, triple-digit returns on advertising spend (ROI). While many of Facebook’s peers offer a value proposition that entails better ROI, it is often via an inflexible, expensive, or monolithic solution. In contrast, the Company’s low-cost value chain, especially its multibillion user social platforms, and an arsenal of ad measurement tools, both acquired and internally developed over the past several years, provide advertisers with multiple avenues to drive successful ROI.
Facebook’s social platforms serve as very low-cost forms of user traffic and content. Many of Facebook’s competitors pay a substantial portion of their ad revenues in the form of traffic acquisition (sometimes referred to as “customer acquisition”) and/or content costs. For example, television advertising platforms are dominated by telecommunication and multiservice-offering conglomerates. The advertising businesses of these platforms are often carved out from subscriber economics, with the cost of content typically being the largest expense, by far, in running the ad platform. Even digital competitors such as Microsoft Bing, do not spend quite as much on content, but spend a substantial portion of revenue on traffic acquisition.
The Company vows to make further changes, which include conducting audits, improving its privacy policy, and banning third-party data services from its ad targeting platform. These actions continue to increase Company expenses (CAPEX/revenues 16%-21%), however we do not believe there will be any significant impact to the Company’s revenue growth as we believe there are few channels available that can match Facebook’s return on ad spend. We believe strong advertiser demand and healthy ROI, along with Facebook’s ability to increase pricing on their ads, leaves the Company with plenty of room for growth in the years ahead.
d8nn / Shutterstock.com
That said, we do have concerns that we are watching closely. Specifically, in 2017, Facebook created Stories as a Snapchat-like offering. Facebook Stories is another kind of News Feed, but it is visual rather than written media. Stories posts, similar to Snapchat, only remain viewable for 24 hours, plus Stories posts don’t appear in the News Feed or Timeline by default. The challenge is to successfully embed advertising into an impermanent medium of personal experiences. Stories ads, particularly video ads, take advertisers more time to create. In addition, the transition from News Feed ads to Stories looks to be a significantly different transition as compared to desktop ads to mobile ads. The Company has acknowledged the challenge to monetize Stories at a level and pace of News feed. All told, Facebook has approximately 150 million Facebook Stories daily users, 70 million in Messenger Stories, 400 million in Instagram Stories and 450 million in WhatsApp Stories (called Status).
The stock is currently valued at just 16X consensus 2020 earnings. The stock is cheaper still when you consider the $41 billion in cash the Company has on its no-debt balance sheet. The Company recently increased its stock buyback by 60% to $15 billion.
2018 was a worse year for Facebook on the share market. The company ended the last year in the bear market, with the share price plunging over 27% for the year. However, the stock is up 23.33% since the start of the year, as the company posted better-than-expected fourth-quarter earnings. On Monday, FB closed at $165.79. Analysts polled by FactSet has a consensus price target of $195.77 on the stock and a consensus rating of ‘OVERWEIGHT’.
Facebook (NASDAQ: FB) is a popular stock among hedge funds tracked by Insider Monkey. According to our database, hedge funds’ interest in the social network declined during the third quarter. As of the end of the third quarter, 164 funds held FB in their portfolios, compared to 193 funds at the end of the second quarter.
Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!
It’s the revolution reshaping every industry on the planet.
From driverless cars to medical breakthroughs, AI is on the cusp of a global explosion, and savvy investors stand to reap the rewards.
Here’s why this is the prime moment to jump on the AI bandwagon:
Exponential Growth on the Horizon: Forget linear growth – AI is poised for a hockey stick trajectory.
Imagine every sector, from healthcare to finance, infused with superhuman intelligence.
We’re talking disease prediction, hyper-personalized marketing, and automated logistics that streamline everything.
This isn’t a maybe – it’s an inevitability.
Early investors will be the ones positioned to ride the wave of this technological tsunami.
Ground Floor Opportunity: Remember the early days of the internet?
Those who saw the potential of tech giants back then are sitting pretty today.
AI is at a similar inflection point.
We’re not talking about established players – we’re talking about nimble startups with groundbreaking ideas and the potential to become the next Google or Amazon.
This is your chance to get in before the rockets take off!
Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.
AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.
The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.
As an investor, you want to be on the side of the winners, and AI is the winning ticket.
The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.
From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.
This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.
By investing in AI, you’re essentially backing the future.
The future is powered by artificial intelligence, and the time to invest is NOW.
Don’t be a spectator in this technological revolution.
Dive into the AI gold rush and watch your portfolio soar alongside the brightest minds of our generation.
This isn’t just about making money – it’s about being part of the future.
So, buckle up and get ready for the ride of your investment life!
Act Now and Unlock a Potential 10,000% Return: This AI Stock is a Diamond in the Rough (But Our Help is Key!)
The AI revolution is upon us, and savvy investors stand to make a fortune.
But with so many choices, how do you find the hidden gem – the company poised for explosive growth?
That’s where our expertise comes in.
We’ve got the answer, but there’s a twist…
Imagine an AI company so groundbreaking, so far ahead of the curve, that even if its stock price quadrupled today, it would still be considered ridiculously cheap.
That’s the potential you’re looking at. This isn’t just about a decent return – we’re talking about a 10,000% gain over the next decade!
Our research team has identified a hidden gem – an AI company with cutting-edge technology, massive potential, and a current stock price that screams opportunity.
This company boasts the most advanced technology in the AI sector, putting them leagues ahead of competitors.
It’s like having a race car on a go-kart track.
They have a strong possibility of cornering entire markets, becoming the undisputed leader in their field.
Here’s the catch (it’s a good one): To uncover this sleeping giant, you’ll need our exclusive intel.
We want to make sure none of our valued readers miss out on this groundbreaking opportunity!
That’s why we’re slashing the price of our Premium Readership Newsletter by a whopping 70%.
For a ridiculously low price of just $29.99, you can unlock a year’s worth of in-depth investment research and exclusive insights – that’s less than a single restaurant meal!
Here’s why this is a deal you can’t afford to pass up:
• Access to our Detailed Report on this Game-Changing AI Stock: Our in-depth report dives deep into our #1 AI stock’s groundbreaking technology and massive growth potential.
• 11 New Issues of Our Premium Readership Newsletter: You will also receive 11 new issues and at least one new stock pick per month from our monthly newsletter’s portfolio over the next 12 months. These stocks are handpicked by our research director, Dr. Inan Dogan.
• One free upcoming issue of our 70+ page Quarterly Newsletter: A value of $149
• Bonus Reports: Premium access to members-only fund manager video interviews
• Ad-Free Browsing: Enjoy a year of investment research free from distracting banner and pop-up ads, allowing you to focus on uncovering the next big opportunity.
• 30-Day Money-Back Guarantee: If you’re not absolutely satisfied with our service, we’ll provide a full refund within 30 days, no questions asked.
Space is Limited! Only 1000 spots are available for this exclusive offer. Don’t let this chance slip away – subscribe to our Premium Readership Newsletter today and unlock the potential for a life-changing investment.
Here’s what to do next:
1. Head over to our website and subscribe to our Premium Readership Newsletter for just $29.99.
2. Enjoy a year of ad-free browsing, exclusive access to our in-depth report on the revolutionary AI company, and the upcoming issues of our Premium Readership Newsletter over the next 12 months.
3. Sit back, relax, and know that you’re backed by our ironclad 30-day money-back guarantee.
Don’t miss out on this incredible opportunity! Subscribe now and take control of your AI investment future!
No worries about auto-renewals! Our 30-Day Money-Back Guarantee applies whether you’re joining us for the first time or renewing your subscription a year later!
I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.
We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…
Should I put my money in Artificial Intelligence?
Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.
Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…
But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.
That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…
And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.
He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.