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Mark Zuckerberg the World's 3rd Richest: Time to Buy Facebook?

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Facebook (FB - Free Report) CEO Mark Zuckerberg has reportedly surpassed Berkshire Hathaway CEO, Warren Buffett, to become the third richest person in the world. Per Bloomberg, Zuckerberg now trails only Amazon CEO Jeff Bezos and Microsoft co-founder Bill Gates in the list of the richest persons in the world.

The increase in Zuckerberg’s wealth can be attributed to strong returns from Facebook shares, which hit a 52-week high of $203.64 on Jul 6, eventually closing at $203.23, up 15.2% on a year-to-date basis.

Reportedly, Zuckerberg sold roughly $3.58 billion worth of shares to-date in 2018 and now owns shares worth $77 billion, according to FactSet data, cited by MarketWatch. Zuckerberg has pledged to give away 99% of his Facebook stock in his lifetime.

 



 

Facebook’s Shares Unhurt by Data Privacy Scandal

The first-half of 2018 has not been good for Facebook. The company has drawn a lot of flak from the different quarters of the industry, due to the Cambridge Analytical data privacy scandal that impacted almost 87 million users.

The company has also been criticised for its data sharing practices. Facebook recently stated that it had granted a few companies a six-month extension to work in compliance with its new data sharing policy that was enacted in 2015.

Notably, following the Cambridge Analytical data breach news revelation in March, shares of the company lost around 20%. However, the stock managed to rebound over the past three months with returns of almost 20.9% since Mar 20.

The rebound reflects investors’ optimism over Facebook’s different initiatives that primarily aim at strengthening security measures of the platform.

Facebook’s Focus on Platform Safety: Positive

Of late, Facebook has undertaken several measures to curb fake news, terrorism related content and political propaganda.

Facebook will reportedly pay and share advertising revenues for original content produced by news organizations like Time Warner’s CNN, Fox News and Univision. The company has also been reported to use blockchain technology for securing data handling process.
 

 

The company also stated that beginning May 24, all ads related to elections and other political issues on either Facebook or its photo sharing application, Instagram, would have to be labeled with the payer’s name in the disclaimer section.

The respective label will redirect the user to a “searchable archive” to provide information on the budget of the campaign, number of viewers and the demographic details of the audience. People buying political advertisements would have to mention their identity and location.

This apart, the company removed accounts and pages from its platform, which were allegedly involved in influencing the election results, and has also backed the Honest Ads Act.

Facebook has also appointed employees to keep a close watch on the online campaigns as well as invested in artificial intelligence (AI) to combat the data leak threats.

In addition, it has taken the acquisition path to counter fake news menace. Facebook is reportedly acquiring AI start-up, Bloomsbury AI, which specializes in natural language processing (NLP). Its AI technology Cape reads texts and answers questions related to the content.

Key Catalyst: Instagram

Instagram has emerged as an important cash cow for Facebook. The user base of this platform has doubled over the last two years, crossing 1 billion monthly users recently. Moreover, Stories on Instagram surpassed 400 million daily actives. The company is now enabling users to add soundtracks on Stories, which will make it more exciting and engaging.

Facebook recently rolled out a new app called Instagram Lite for Android users. It has been designed especially for developing nations which have weak data connection and low bandwidth. The latest app will help the company tap growth in these nations.

These initiatives provide a competitive edge to Instagram over Snap (SNAP - Free Report) that owns Snapchat, which has just 191 million users. The launch of a longer form video hub called IGTV will help it better compete with Alphabet’s (GOOGL - Free Report) YouTube and Twitter (TWTR - Free Report) .

Although no exact number with regard to contribution from Instagram was shared, growing adoption among advertisers is evident. Per eMarketer, Instagram will generate $5.48 billion in U.S. ad revenues in 2018, up 70% year over year. The firm reports that 28.2% of Facebook’s mobile ad revenues come from Instagram.

Positive Zacks Rank & Good VGM Score

Facebook has a Zacks Rank #2 (Buy) and a VGM Score of B.

Our research shows that stocks with VGM Score of A or B, when combined with a Zacks Rank #1 or #2 (Buy), offer the best upside potential.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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