The brutal correction in NASDAQ last week did not spare such former tech sector darlings as cloud software, semiconductors and social media shares. The big daddy of social media is Facebook (symbol FB) and its shares were slammed by $19 on NASDAQ to $262 or $42 below its recent high. Even though Facebook beat the Street’s EPS whisper number, its chief financial officer confessed that member count had declined in the US and Canada and the data privacy/regulatory Gestapo are once again on the warpath. This was bearish for the shares at a time when the stock market is skittish about a contested election, the lack of any Big Bang fiscal stimulus and mediocre revenue guidance by Microsoft and Apple.
Yet FB’s platforms – Facebook app, Messenger, Instagram and WhatsApp – now boast 3.21 billion monthly users worldwide. Mark Zuckerberg has thus created one of history’s perpetual money-making machines, and the covid pandemic plus the coming holiday season will make Facebook the only credible life jacket for drowning retailers across the Milky Way. Asia added a record 30 million new members in the third quarter. Oculus/5G makes virtual reality the next big thing to goose Facebook’s user engagement metrics. With a market cap of $749bn, Facebook trades at a not unreasonable valuation of 25 times earnings. While I would ideally prefer to buy shares below $230, the stock market may not give me that chance.