Facebook (NASDAQ:FB) is resilient, if nothing else. In spite of being the subject of negative press, the social media giant continues to impress investors. Even down over 10% from its 52-week high, Facebook stock continues to reward shareholders.
And I believe the reason for that is simple enough. Most of what surrounds Facebook stock is noise. Unless many millions of users leave the platform, Facebook will still command the kind of ad revenue it gets. And that doesn’t appear to be happening.
In fact, to many investors, their commitment to Facebook stock is akin to their commitment to the platform itself. It may not be perfect, but it’s what we have. The idea of “if you don’t like a (insert name of social media platform here) build your own” is quaint, but unrealistic.
However, at a time when society may be starting to ask the right questions about the benefit of social media to our lives, it’s worth asking how much you should like Facebook stock?
Facebook Is Not Your Friend
Don’t get me wrong. The company is probably more than willing to give you a “like.” However, it’s becoming increasingly likely that its conviviality comes with conditions. Plus, despite being an app that’s geared towards individuals being social, the company’s growth plans have never really put its users first.
That was made evident written by Bill Murphy Jr. for Inc. In the article, Facebook founder and CEO Mark Zuckerberg is said to have announced plans to use virtual reality and augmented reality to allow individuals to appear in front of someone as if they were in the same room. Zuckerberg is quoted as saying, “We should be teleporting, not transporting ourselves.”
OK, that may sound weirdly interesting, or just weird. However, as the world is coming out of a pandemic, it seems that we should be looking to become more connected, not less.
Either way, it goes to a central thesis that Facebook is largely driven to create features that will drive engagement. The problem is many users didn’t ask for those creatures to be created. If you want to argue that it’s the role of “big tech” to create value-added features we didn’t know we needed, I’ll accept your point. If you consider the ability to change your avatar into a cartoon character as a value-add feature, we’ll part company.
You Are The Product
The “right questions” I mentioned above have to do with privacy and security. Apple (NASDAQ:AAPL) has built a reputation for protecting the security of its users. Which makes the announcement of its upcoming privacy changes that much more intriguing. Apple charges a premium for its product but values its customers. Facebook charges nothing to use its platform and perhaps takes those users for granted.
The reality is that when it comes to social media, you are the product. And as some users start to understand that, they are becoming more concerned with Facebook’s ability to track them. That’s not a large group at the moment and Facebook wants to keep it that way.
Should You Like Facebook Stock?
My takeaway is that investing in Facebook stock comes down to your feelings about the company. Big tech companies are likely to be under the microscope of Congress. At this point, it’s one of the few things that the extremes of either party may agree on. And if they meet in the middle, things could get very volatile for Zuckerberg and Facebook.
That’s the risk, and I think investors would be foolish to ignore it completely. However, the business fundamentals of Facebook are likely to remain solid. The more people that are engaging with the app, the more advertisers are willing to pay for access to where those eyeballs are going on the web.
And yes, Apple’s announced initiative may pose a threat to that. But human nature being what it is, I perceive you may have more engagement with Facebook as our world returns to normal, not less.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.