Facebook saw a slight recovery in recent trading sessions after sinking to 52-week lows in the pre-Christmas holiday selloff. The recovery, while it contributed to an overall market rally, does little for investors hurting from the now 36 percent drop from all time highs of $209 reached in June. Nonetheless, Facebook could take another beating in 2019.
The good news for long-term Facebook investors is that, according to Citron Research, the pain is largely in the past.
In a note published on Wednesday, Andrew Left and Citron Research have come out as bullish on Facebook, after years of a bearish stance. Previously, the short seller had a long-term short stance on the stock, and operated under the belief that engagement with the social media platform would “top out” eventually. Since their initial assessment two and a half years ago, the company has seen a meteoric rise and fall in its share price, while fundamentals and revenue figures have improved at a steady rate. With scandals unrelated to company financials dragging the share price down over the second half of 2018, Left and Citron research feel that a turnaround is imminent for 2019.
“2018 is a year that Facebook shareholders would like to forget, as the stock is down 30% YTD and over 40% from its recent high,” reads Citron’s research note. “Yet, while the media has reported on one scandal after the next and the NYT even tried to promote a #deletefacebook movement. The truth is revenues and more important user base has seen little impact.”
In fact, in the face of controversies ranging from an inability to police propaganda, genocide in Myanmar, and security breaches, Facebook has been able to increase revenues at a staggering rate of 33 percent over the past 12 months. More revenue verticals are on the way as well; among them are e-commerce and peer-to-peer transactions.
As Citron highlights, Instagram and Facebook are becoming increasingly essential and innovative vehicles for e-commerce marketing, and Instagram is currently building a standalone app solely for online shopping. With shopping malls evaporating and target markets for many brands spending more time online than ever, Instagram has become a vehicle to sell anything and everything.
Moreover, Bloomberg recently reported that Facebook would follow Square Cash and Venmo into the peer-to-peer money transfer arena, and implement its own stable coin to facilitate it.
With traditional revenues increasing and additional streams being implemented, Facebook would be a sure “buy” in any market. Today however, the company is continually brought down by controversy and broad market headwinds.
Moving forward, Zuckerberg and the company as a whole have announced actions meant to dispel any concerns related to privacy and propaganda. If these headwinds and government actions resulting from the controversy can evaporate, Facebook as a company will continue soar.
“As investors have become overly concerned about the short-term noise of privacy and propaganda, they have forgotten to look at the earnings power and potential of the most advanced advertising tool with global reach in messaging, networking, and the future of shopping,” wrote Left.