In Focus: Facebook to $400
In June of 2020 I wrote that Facebook ($FB) would trade to $300 per share. At that time the #StopHateForProfit hashtag was imploring advertisers to suspend their advertising on Facebook until the company did something to curb the hate speech found on the platform. For those that don't remember, this was big. Companies like Ben & Jerrys, Coca-Cola, Hershey's, Honda, Verizon, JanSport, North Face, and Levi Strauss all joined the movement to stop advertising on Facebook. The issue caused Facebook's stock to drop from the $240 range that it was trading at to below $220 per share. In spite of all the controversy, drama, negative reviews and write-ups, Facebook's stock bounced back and traded to over $300 per share two months later, just like I thought it would.
Today Facebook again finds itself in another mess, this time on two fronts. First, internal documents obtained by the Wall Street Journal revealed a study done by Facebook determined Instagram is damaging to the mental health of teens. Second, a former Facebook employee turned whistleblower has been making the media rounds and advising the public that Facebook is set up to amp up rage and make a profit off of that rage.
Yet with all that's going on, I'm confident that Facebook will trade to over $400 per share. The three reasons fueling my belief of a $400 stock price are pretty simple. It's a matter of caring, which we think we do, but we don't. Next it's a matter of regulation, and our politicians aren't mentally equipped to regulate Facebook, and lastly, the Facebook network is where the eyes are, and advertisers need eyes.
You Think You Care
The sad reality of it is most of us don't care. We like to pretend we care. We get up in arms when we hear these crazy things happening at the social network, but we've been hearing crazy things happening at Facebook since 2018, and the company is still growing.
A year after the #StopHateForProfit movement mentioned earlier, Facebook's advertising revenue has grown by 56%. The company did make some adjustments and changes in an attempt to curb hate speech on its networks, so maybe the 56% growth in ad revenue was a reward for its efforts.
However, the marker that tells me we the people really don't care is that many of the points made by Frances Haugen, the Facebook whistleblower, were made in the Netflix documentary "The Social Dilemma" a year ago. People were moved by "The Social Dilemma" and the documentary did start some debate, but in the end, nothing was done. Nothing was done, because we don't care as much as we should.
My thoughts on politics and politicians are blah. To me it's always been more about talking and less about doing. In any event, my thought is that our regulators will talk a big game about all that is happening with Facebook, but in the end do nothing.
To be honest, I don't think many of them really know where to start with Facebook and regulating the social media giant. According to guides.loc.gov, the average age of a senator is 63 and the average age of a House member is 58. At these ages, many of our politicians left school decades before social media was a thing. Hell, even if you're in the early 40s and a former business major, you likely made it through college without studying anything related to social media. This social media issue, and how to regulate it just isn't in the wheelhouse of our politicians. Some don't know the difference between Facebook, Twitter, Instagram, SnapChat and TikTok. So how can one fairly regulate what one doesn't understand?
I'll be the first to admit I wouldn't want to be a politician dealing with this issue, because it is a delicate dance. If regulation is too soft, then it's like handing out $1.00 speeding tickets with no threat of jail, which will allow Facebook to keep speeding with very little consequence. If regulators get too heavy handed, then their regulations could have unintended consequences on the future of tech and tech startups in the making.
We've Got the Eyes
The final reason that I believe the latest Facebook drama will blow over without much fallout and that the stock will hit $400 is because the company has the eyes, and advertisers need eyes.
The current world population according to worldometer.com is 7.8 billion. In Q2 2021, Facebook had 2.9 billion monthly active users. That is a lot of eyes to market and advertise too. Facebook has grown itself into the company people hate doing business with, but can't avoid doing business with. Companies are a hostage to the Facebook network, and Facebook isn't holding a gun. It's part genius, it's part sickening, it is the sad reality of things.
To Invest or Not
Morals or money? Piety or Profits? For some investors, a Facebook investment comes with a weight attached to it that isn't present with other investments. For those that can bear the weight, now seems like the time to be involved, especially if you missed last year's run from $200 to $300 per share.
Facebook has been called out and exposed before, and the company grew through it all, and its investors got richer through it all. I expect more of the same from this recent round of Facebook scandal.