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Facebook (FB Stock): Buy Rating

I wanted to review my thoughts following Mark Zuckerberg’s testimony to Congress. Many of these thoughts we brought up in chat to subscribers but I wanted to get my thoughts out more officially and to anybody not on chat.

Bullish Testimony

I came away bullish from the testimony to Congress. Mr. Zuckerberg was very well prepared and responded very well to what Congress hoped would nail him. They did not which makes them look bad. There were also periods of lightheartedness on both sides meaning the tone of the questioning was much more bullish than could have been expected.

Many of the members of Congress were begging Mr. Zuckerberg for support of their own individual causes which tells me he’s probably more in the clear.

Turning Point?

As you know I also wanted to see how the stock ‘acts’ on bad news and I have mentioned these big climax events could be turning points.  The stock was up into his speaking and went up more after he spoke and the next day.  I think that’s a very good sign.

The negatives out there will continue to be negative news-flow through to November elections. But hopefully the worst of the shock value of the news is behind us and the stock can act on earnings and fundamentals which I am still very bullish.

Slightly Higher Expenses

The positives are our earnings numbers, if correct, are still blow out despite their plans to up expenses 45-60% in 2018 that they stated in November and again in the recent earnings report.

Mr. Zuckerberg did say something to the effect that they will have more than 20,000 people by year end dealing with security. Facebook said on November’s earnings call,

“We already have about 10,000 people working on safety and security, and we’re planning to double that to 20,000 in the next year to better enforce our community standards and review ads.” 

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