(FB - Free Report
) has fallen into the cellar of the Zacks Rank because analysts keep lowering their EPS estimates, trying to keep up with the digital advertising giant's "reversal of growth."
Even though that downturn is more self-inflicted than caused by celebrities inspiring the masses to #deletefacebook, the path of transformation and reinvention for Mark Zuckerberg's dream machine will result in slower revenue and earnings growth for possibly another year as the company builds a better friend machine.
What was self-inflicted? The company's own realization in 2017 that they needed to control two flows of dis-information and potential tribalism:
(1) the ad buyers who could target specific audiences with destructive or manipulative messaging (i.e., "fake news")
(2) the individual users and groups who could spread their dis-information and political propaganda, even hate speech, without recourse
And Zuck & Co. also realized they couldn't limit the virulent effect of "bots" without also reengineering their own algorithms.
In short, the mea culpa for being involved in massive political warfare -- sometimes even promoting hate groups -- has brought the mighty influence machine to a reckoning where costs are rising, less advertising is being accepted (i.e., lower revenues), and many users and former users have noticed the new restrictive nature of "big brother" Alphabet's (GOOGL) "little brother."
I discussed these techno-cultural dynamics in my July podcast and article...
Still a Growth Machine
All this said, the company is still estimated to grow sales over 36% this year to $55+ billion.
And even next year still looks great in analyst binoculars with a 24.5% top line advance to a record $69 billion.
EPS growth -- despite the rising costs of hiring many thousands of human "social police" to watch the ads and content streams -- is expected to hit +14% this year and next.
And this after 2018 EPS estimates fell from $7.66 to $7.08 in the past 60 days, while 2019 profit projections dropped over 13% from $9.33 to $8.09.
Yet still, these consensus projections from dozens of Wall Street investment banks for the #2 digital ad powerhouse, with over 2 billion monthly active users (MAU) worldwide, are what will keep large growth investors buying Facebook shares at these levels and lower as the company reinvents its platform for the better and innovates to monetize Instagram advertising.
In fact, those large funds, whether its David Tepper's Appaloosa, Andreas Halvorsen's Viking Global, or Steve Mandel's Lone Pine Capital won't mind the dips at all.
We joined them in March on the first dip to back to $150 and we sold above $190 in my TAZR Trader
portfolio. I always believed that Zuck & Co. knew what they had to do to make the social media ecosystem a better environment for friends, family, entrepreneurs and even the occasional political affiliation.
And I'll probably do it again after we get the first sign that estimates have bottomed and are about to turn upward again.
The Zacks Rank will let us know.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.