Facebook Stock: Is It a Good Buy Right Now? - GOBankingRates

Meta Platforms, the parent company of Facebook (Nasdaq: FB), ... stock a “strong buy” and 24 rate it a “buy,” according to Yahoo Finance. AdvertiserDisclosure Manyoftheoffersappearingonthissitearefromadvertisersfromwhichthiswebsitereceivescompensationforbeinglistedhere.Thiscompensationmayimpacthowandwhereproductsappearonthissite(including,forexample,theorderinwhichtheyappear).Theseoffersdonotrepresentallavailabledeposit,investment,loanorcreditproducts. Investing/Stocks FacebookStock:IsItaGoodBuyRightNow? ByKarenDoyle February9,2022 EarningsResults FutureOutlook Buy,SellorHold ConsiderYourPortfolio LloydCarr/Shutterstock.com MetaPlatforms,theparentcompanyofFacebook(Nasdaq:FB),releaseditsfourth-quarterandfull-yearearningsforfiscalyear2021onFeb.2.Thetechgiant’sweakquarterlyresultsandfirst-everdeclineinactivedailyuserssentthestocktumblingover26%.ItwastheS&P500’slargest-everone-daydecline,anditstrippedthecompanyofover$230billionworthofmarketvalue,TheNewYorkTimesreported.Doesthatmeanyoushouldrushouttobuythestockinthedip,holdofftoseewhathappensnext—orforgetitentirely?Here’swhatyouneedtoknow. FacebookbytheNumbers Salesinthefourthquarterwere$33.67billion,20%higherthansalesinthesamequarterlastyearandoutpacinganalysts’expectationsof$33.4billion,CNBCreported.However,thatwasn’tenoughtogenerateaprofitinlightofthesocialmediagiant’s38%increaseintotalcostsandexpenses—someofwhichcanbeattributedtoanoutsizedinvestmentinitsmetaverseinitiative—comparedtothesamequarterlastyear.Facebookfinishedthequarterwithnetincomedown8%yearoveryear. BuildingWealth Earningswere$3.67pershare,whichfellshortofthe$3.84pershareanalystsexpected. Theaveragenumberofactivedailyusersfellbyabouthalfamillionusers,accordingtoTheWashingtonPost. Theannualnumberspaintarosierpicture: Totalrevenue:$117.93billion,up37%from2020 Profits:$39.37billion,up35%from2020 Facebookactivedailyusers:$1.93billion,up5%from2020 Advertisingrevenue:$114.93billion,upover35%from2020 ARevenueBeatDoesn’tAlwaysSignalanIncreaseintheStockPrice Althoughquarterlyearningspersharewereslightlylowerthananalystshadpredicted,revenuewassubstantiallyhigherandtheannualresultswerepositiveoverall.Yetthestockpricetanked. Why? Theanswertothisquestionmaybeeasierthanitseems.Whileinvestorsdon’thaveacrystalball,theystillbasetheirtradingdecisionsonwhatislikelytohappeninthefuture,notwhathashappenedinthepast.AndthefuturelooksalittlemurkyforFacebook. Thecompanyhadwarnedthatadvertisinggrowthcouldbesluggishinthefourthquarter.ChangestoApple’siOSoperatingsystemhavemadeitharderforFacebookandothersocialmediacompaniestotargettheiradstoconsumers,whocannowoptoutofhavingadvertisersfollowtheireverymoveonlineinordertoserveupadsrelatedtosearchesthey’veperformedandsitesthey’vevisited. BuildingWealth There’salsotheuncertaintyofWashington’sconcernoverthemisinformationthatspreadsuncheckedonFacebookandothersocialmediaplatforms.InMarch,MarkZuckerbergwascalledtotestifybeforeCongress,alongwithsomeofhisfellowtechCEOs,aboutwhattheplatformisdoingtoensurethaterroneousinformationaboutCOVID-19andothertopicsisn’tsharedasthoughitwerefact.AndinOctober2021,CongressheardtestimonyfromawhistleblowerwholeakedatroveofcompanydocumentstoTheWallStreetJournal.Includedinthedocumentswereresearchreportsandemployeediscussionssuggestingthecompanyknewitwaspromotingharmfulcontentonitssocialmediaplatforms,includingFacebookandInstagram,theJournalreported,butignoredthedangertoprotectprofits—anallegationZuckerbergdenies.FacebooknotedduringtheQ3earningscallthatitwasunderinvestigationbythegovernment. Facebookfacesnewlegaltroublesheadinginto2022thatbeganjustweeksintothefirstquarterofits2022fiscalyear.TheFederalTradeCommissionhasfiledalawsuitagainstFacebookallegingtheplatformhasamonopolyinsocialmediaandhasabuseditspowerbyengagingina“buy-or-bury”strategythatharmeditscompetition,TheNewYorkTimesreported.AfederaljudgegreenlightedthesuitonJan.11 Inits2021annualreport,Facebookreiteratedrisksitfacesrelatedtogovernmentregulationandenforcementaswellasotherlitigation,includingclassactionsuits.Italsonotedthatunfavorablemediacoveragecouldaffectitsabilitytomaintainandenhanceitsbrand. Lookingtodiversifyinabearmarket? Considerthesefivealternativeinvestmentsthewealthyuse LearnMore CompetitionfromotherplatformshasdrivenMetatobeefupitsownsocialofferingswiththeintroductionofInstagramReels.Reelsgetprimespaceonusers’Instagramfeedsandaretheapp’sprimarydriverofengagement,TheNewYorkTimesreported.WhetheritcantakemarketsharefromTikTokremainstobeseen. Themarketdoesn’tlikeuncertainty,andthereisafairamountofuncertaintyrightnowaroundwhetherFacebookcanovercomethesechallenges. IsFacebookStockaGoodBuyNow? Noinvestorcanpredictthefuture,andhistoricaldataonlysayssomuch.DeterminingwhetherornotFacebook—oranystock,forthatmatter—isagoodbuydependsonanumberoffactors. WhattheAnalystsSay Of44analystscoveringFacebookinFebruary,17ratethestocka“strongbuy”and24rateita“buy,”accordingtoYahooFinance.That’sdownfromJanuary2021,when18ratedita“strongbuy”and30ratedita“buy,”butanalystsseeFacebook’scurrenttroublesastemporary.Theiraveragepricetargetis$353.91—over49%abovethecurrentprice. CNBC’sJimCrameragreesthatFacebookwillbounceback,albeitperhapsnotbeforeafurtherdecline.HetoldCNBCthatinvestorscanexpectaperiodofchaoticselling,butafterthat,“IpredictMeta-Facebookwillbeabuy.”Thatsaid,Cramerdidagreethatthequarterlyresultsweredisappointing.Forthosewhomightbeconsideringselling,hesaid,“Youcanjustifysellingthestock,maybedownasmuchas15%,”buthecalleda26%decline“overdone”because“Facebookhasactualearnings.” WhattheFundamentalsShow Thereareanumberofmetricsthatinvestorsusewhentheyresearchstockstodeterminethehealthofacompanyrelativetoothersinitssectorandtothemarketasawhole.Oneoftheseistheprice-to-earningsratio.TheP/Eratiocomparesastock’spricetotheearningspersharethecompanygenerates.Theratiotellsinvestorshowmuchthey’repayingforeachdollarofearnings.So,ifastockistradingat$25pershareandearningspershareare$1,thatstockhasaP/Eratioof25. TheP/Eratioisusefulwhencomparingstockstooneanother,tothesectorthey’rein,ortothemarketasawhole.AsofFeb.5,Facebook’sP/Eratiowas17.22.TheestimatedP/Eratioforthetechsectorfor2022is30.22,accordingtoFidelity.AndtheP/EratiofortheS&P500atthebeginningofFebruarywas25.37. Ofthesethreeratios—thatofFacebook,thetechsectorandtheS&P500—Facebook’sisthelowest.AlowerP/Eratioisbettersinceitmeansyouarepayinglessforadollarofearnings.So,sinceFacebook’sP/EratioislowerthanthatoftheS&P500andthetechnologysector,fundamentalanalysissaysthatthestockisarelativelygoodvalue. HowToKnowIfFacebookStockIsRightforYou There’sanotherconsiderationthatisoftenoverlookedwhendecidingwhetherornottobuyaspecificstock,andthatishowitfitsintoyourportfolio. Agoodstockportfoliocontainsagoodmixofstocks—smallcaps,largecaps,growthstocks,valuestocks,foreignstocks,domesticstocks,andstocksfrommanydifferentindustries.Diversificationisimportant,evenifyoudon’thavealargeportfolio. Advice BeforeyoudecidetobuyastocklikeFacebook,youwanttomakesureyourportfolioisn’ttooheavilyconcentratedintechnologystocks.Thissectorhashadagoodrunrecently,soitmayrepresentalargerpercentageofyourportfoliothanyouthink.That’snotnecessarilyabadthing,butyoumaywanttosellsomeofyourothertechholdingsifyoudecidetobuyFacebook. Forsomeinvestors,anothercriteriontheyconsideristhecompany’smission,visionandculture.Youmaywanttothinkaboutwhetheryouconsiderthecompanytobeagoodcorporatecitizenandafairemployerbeforeyouchoosetoinvest. DariaUhligcontributedtothereportingforthisarticle. DataisaccurateasofFeb.5,2022,andsubjecttochange. ViewSources Ourin-houseresearchteamandon-sitefinancialexpertsworktogethertocreatecontentthat’saccurate,impartial,anduptodate.Wefact-checkeverysinglestatistic,quoteandfactusingtrustedprimaryresourcestomakesuretheinformationweprovideiscorrect.YoucanlearnmoreaboutGOBankingRates’processesandstandardsinoureditorialpolicy. MetaPlatforms.2022. "MetaReportsFourthQuarterandFullYear2021Results." Facebook.2021. "FacebookReportsThirdQuarter2021Results." TheNewYorkTimes.2022. "MetaplungesandsetsoffWallStreet’sworstdropinnearlyayear." CNNBusiness.2022. "Meta'smarketvaluejustdroppedbymorethanmostcompaniesareworth." CNBC.2022. "Facebookstockplummets26%initsbiggestone-daydropever." TheWashingtonPost.2022. "Facebooklosesusersforthefirsttimeinitshistory." TheNewYorkTimes.2022. "AFacebookantitrustsuitcanmoveforward,ajudgesays,inawinfortheF.T.C." CNBC.2022. "CramerexpectsFacebookparentMetasharestofallfurther,saysdon’tbuythedipjustyet." AbouttheAuthor KarenDoyle KarenDoyleisapersonalfinancewriterwithover20years’experiencewritingaboutinvestments,moneymanagementandfinancialplanning.Herworkhasappearedonnumerousnewsandfinance websitesincludingGOBankingRates,Yahoo!Finance,MSN,USAToday,CNBC,Equifax.com,andmore. 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