Facebook shares (FB – Free Report) have climbed 16% since Christmas Eve, while the market has been trying to rebound since 2019. Despite this rise, the FB stock remains below about 34% at its peak. 52 weeks. At the same time, Facebook's dominance in the digital advertising market, with Google (GOOGL – Free Report), is expected to grow with Instagram's growing popularity among advertisers.

Overview

Facebook shares closed their usual trading on Thursday at 144.20. This represents a decline of 34% from the record amount of $ 218.62 per share recorded by FB since 52 weeks. Shares of the social media group have fallen since July due to persistent concerns about user data and slowing growth. That alone could give investors enough incentive to buy FB shares, as the market looks set to recover, driven by gains made after Christmas by giants like Amazon (AMZN – Free Report).

Mark Zuckerberg and Facebook have had to face a lot of political reactions in the United States and Europe for the dubious treatment of user data by the company. However, as we move forward, more and more government and public officials are likely to move from Facebook to Twitter (TWTR – Free Report) as the conversation about privacy takes their toll. expands to the ever – expanding digital age.

Specifically, Facebook is still a central advertising agency with 2.27 billion monthly active users on its platforms. As a result, even if Facebook never wins another user, its revenues would go up and marketers are desperately trying to reach consumers because Netflix (NFLX – Free Report), Amazon Prime and other non-advertising supported platforms take a larger share of the training market. Nor should we forget that the era of streaming on demand is just beginning, with Disney (DIS-Free Report), Apple (AAPL – Free Report) and other giants about to join him.

Instagram

In addition to Facebook's ongoing search for high-quality live streaming video content and augmented reality aspirations, the company's photo and video sharing application has become a real heavyweight. The share of Instagram in digital video budgets is expected to double from 2018 to 2020, according to Cowen.

The application has become one of the main choices of adversities to introduce new brand campaigns targeting the key market of 13 to 34 year olds. Instagram "Stories", a relatively new feature, has made the platform even more attractive to advertisers. Cowen also speculated that Instagram's growth would help all of Facebook's live video campaigns.

Perspective

With Instagram, Facebook's main platform has remained a destination of choice for advertisers looking for those thirty-five years and older. According to our estimate of the current Zacks consensus, Facebook's fourth quarter revenues are expected to jump $ 16.4 billion, a slowdown from the 33% jump in the third quarter. At the same time, the company's revenue for 2018 is expected to increase 36.1% to $ 55.33 billion. This would also mark a significant slowdown compared to the 47% growth in 2017 revenue.

Looking even further, Facebook's revenues for fiscal 2019 are expected to climb 23.7% from our forecast for 2018 to reach $ 68.47 billion.

Fourth quarter FB adjusted earnings are expected to decrease 1.4% from the same period last year to reach $ 2.17 per share. The company's profit for the 2018 financial year is expected to increase further by 19.6%. However, the company's adjusted earnings for 2019 are expected to be down 0.3% from our guidance for the current year.

Investors are unlikely to be happy with Facebook's financial outlook. That said, we must remember that Facebook plans to spend billions of dollars trying to fix its user data, "false information" and misinformation issues. The company said its operating margin would likely fall in half of 30 years over a period of more than two years – FB's operating margin went from 50% in the third quarter of 2017 to 42% in the previous quarter .

Bottom line

Facebook knows that its revenues will suffer as it spends the money needed to make the necessary changes to remain a viable internet giant for years to come. At the end of the day, investors should simply ask themselves if they imagine that one of the most important and widely used communication platforms, with its dominant position in digital advertising spending, will at least not be able to return to previous highs.

It should also be noted that Facebook is trading at 19.5X ahead of the Zacks EPS consensus estimate of 12 months. This represents a reduction from its one-year high of 28.6 times and both its five-year median of 34.9 times and its five-year high of 67.9 times. Therefore, we can say with some confidence that Facebook shares appear "cheap" at the moment.

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