Facebook (NASDAQ: FB) zigzags where it should zag

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Band Stjepan Kalinic

This article first appeared on Simply Wall St News.

Facebook, Inc. (NASDAQ: FB) was recently hit with a two-hit combo – a 6-hour system crash combined with a whistleblower testifying before the Senate committee.

This is not the first tango for Facebook because it has experienced similar situations in the past, but not strictly at the same time. Still, this contributed to the stock’s prolonged decline which is now underperforming the entire stock market year to date.

Check out our latest analysis for Facebook

Bad news comes in a pair

After a global outage on October 4, Facebook released a statement attributing it to configuration changes on the backbone routers that coordinate network traffic between data centers. The company is transparent that there was no malicious activity behind the outage but an internal configuration error.

Meanwhile, former Facebook employee and whistleblower Frances Haugen testified before the Senate Trade Committee, arguing that the company is withholding crucial information from the public and is aware of the negative effect its platforms can have on its users. . Facebook is now sitting at a crossroads where there are threats of tighter regulations (or outage) and users are realizing the dangers of algorithmically enhanced data collection and social media addiction.

Still, the company doesn’t seem to be realizing it yet, as it just shut down the developer who created “Unsubscribe Everything,” a browser extension designed to control the news feed by filtering content.

What does the future of Facebook look like?

NasdaqGS: FB Earnings and Revenue Growth October 9, 2021

Future prospects are an important aspect when considering buying a stock. With expected earnings up 49%, the future looks bright for Facebook.

It looks like a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock. In addition, the company appears to be undervalued according to our expected cash flow model.

What this means for you:

While Facebook is undoubtedly doing a good job for shareholders and analysts remain bullish, issues with the company are on the rise.

The changes, like with iOS 14.5, put pressure on ad margins as users overwhelmingly deny tracking permissions. Adapting to these data tracking changes arguably presents a bigger problem than the latest reviews about fixable issues – not easy, but not impossible for a company worth nearly $ 1,000 billion.

Thus, the company should prioritize the repair of its image in the short term, even if it means losing revenues in the medium term so that it can carry out ambitious projects like the Metaverse in the long term.

Are you a shareholder? Given that FB is currently below the industry PE ratio, this may be the perfect time to increase your holdings in the purse. With an optimist prospects on the horizon, it seems that this growth has not yet been fully reflected in the share price. However, other factors such as capital structure to consider could also explain the current price multiple.

Are you a potential investor? If you’ve been keeping tabs on FB for a while, maybe now is the time to enter the stock. His prosperous the outlook for future earnings is not yet fully reflected in the current share price, meaning it’s not too late to buy FB. But before making any investment decisions, consider other factors such as the history of its management team make a knowledgeable investment decision.

It can be very helpful to consider what analysts expect from Facebook from their most recent forecasts. Fortunately, you can check out the analysts’ forecasts by clicking here.

If you’re no longer interested in Facebook, you can use our free platform to view our list of over 50 other high growth stocks.

Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no positions in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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