Beaten But Not Broken – What’s Next For Facebook?

Year 2018 has been a difficult year for Facebook. Events such as the Cambridge Analytica scandal, privacy breach issues, and Sheryl Sandberg testifying before lawmakers on Capitol Hill were a few of the action filled events in 2018 for Facebook. The stock under-performed in 2018 falling 25% within that time frame. This begs the question on how can Facebook turn this around in years to come.
Facebook recently moved into the blockchain technology space after recent talks of developing Stablecoin in 2018 and hiring former PayPal president David Marcus in 2014. Stablecoin is a cryto-currency but it is designed to minimize the price volatility typically associated with other crytos by being pegged to the value of the US Dollar. Facebook’s move into Stablecoin is an initiative to try to monetize WhatsApp. WhatsApp, Facebook’s cross-platform messaging app has over 1.5 billion monthly active users and this opens up a large base that Facebook can monetize using Stablecoin.

Facebook also has its Instagram and Facebook messaging app it can tap into and monetize. In 2014, Facebook acquired Oculus Virtual Reality (VR) headsets. Although, it has not been a full success as far as popularity goes, Facebook has been refining the products and publishing more games on its Oculus Rift platform.

From a balance sheet standpoint, Facebook is in a great position with $4 Billion in free cash-flow during 3Q2018, 42% in operating margin, and $1.76 diluted earnings per share. Also, with an extremely low total debt to earnings ratio of 0.01, the company is well positioned to make a substantial acquisition in years to come. Future acquisitions should be able to expand Facebook’s reach and diversify its holdings.

In summary, Facebook has been through some tough times in 2018 but I believe the company has options to achieve tremendous growth in the future due to its excellent balance sheet and new initiatives.


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