so in this video here we're gonna be
talking about Facebook stock and my top
three reasons why you would be
considering investing in this stock at
this point in time now I've been bullish
on Facebook stock for quite some time I
started buying shares of this company
after the Cambridge analytical scandal
and I also picked up more shares after
the recent sell-off and if you guys are
in my private stock market community
stock radar you get to see my real stock
portfolio and you know exactly what I'm
investing in and when I am buying that
so that is when I started adding
Facebook stock primarily during those
two sell offs and that's kind of my
favorite time to be picking up shares is
unjustified pessimism surrounding that
stock but the first thing I want to do
is just cover a brief history of what's
been going on with Facebook stock in the
beginning to middle of 2018 so first of
all from mid-march to the end of March
we saw that Facebook stock slid around
18% due to this Cambridge analytic data
scandal and that is when I initially
started buying shares of Facebook stock
in the $150 range in my opinion I felt
that this would not affect Facebook at
all it would be just some short-term bad
press and it would blow over now what
happened after that was something I
never expected to see happen from April
to the end of July Facebook stock
rallied over 42% it climbed over 42% in
that timeframe and it's what I would
call an insane unsustainable rally with
Facebook stock I expected them to come
back to the range they were trading in
before Cambridge analytic ah I did not
expect them to be making all-time highs
in two to three months after that so
that was unbelievable to see that and in
my opinion it was an unsustainable rally
with Facebook stock and then at the end
of July
Facebook purported earnings and from the
end of July to August Facebook stocks
slid 21% on a slight revenue miss and
global daily active user miss and this
really freaked out Wall Street as they
were beginning to realize that a company
the size of Facebook cannot grow as
faster they've grown previously one of
the main reasons is because they've
achieved market saturation where so many
people know about the platform and are
already using it it's hard to find
people that don't already know about
Facebook and want to begin using
Facebook or the other social media
platforms owned by Facebook but I've
heard a lot of people saying that
they're concerned about investing in
Facebook or they think this is a time to
sell Facebook and in my opinion I think
this is at the exact opposite of that
this is a good time to be loading up on
shares of this company and now of course
you guys need to do your own due
diligence whenever you invest you know
learn more about this company why they
should want to invest in it but I want
to give you guys my top three reasons
why I'm personally invested in this
stock and I'm very bullish in the long
term on Facebook the number one reason
why I'm investing in Facebook is
actually because of Instagram I
full-heartedly believe that Instagram is
going to be bigger than Facebook in the
next couple of years and I've even
personally been investing quite a bit in
that platform I've been building up my
own personal page on Instagram I
purchased one of the largest investing
Instagram accounts out there and that's
just because personally I believe this
is going to be a superior platform in
the long run now a lot of people are
saying wait a second doesn't that mean
Facebook is going to go out of style
it's going to be the next myspace
absolutely not
and the reason for that is because
Facebook has become extremely popular
with the older generation so I think
that you're gonna see the older
generation sticking to what's familiar
they're going to be sticking to Facebook
and you're gonna see the younger
generation if they haven't already
moving moreover and using Instagram and
this was even a conversation I had with
some of my younger cousins a couple of
weeks ago I asked them what's hot right
now what are people using and they're
saying okay snapchats not cool anymore
Instagram is where it's app and you know
Facebook I don't really like Facebook
anymore so if you ever want to get a
good idea of what is going on as far as
what's cool and what's not ask a high
schooler because that is the group that
determines what app is hot what app is
everyone using how are you staying
connected with your friends and right
now Instagram is winning for young
people we know that snapchat made some
huge mistakes with their platform
updates and as a result more and more
people moved over to Instagram as they
had that same ability to have the
feature and pretty much everything else
snapchat had to offer so I don't see
snapchat going anywhere good from this
point in time forward and I see nowhere
but up for Instagram to go in the next
two to three years in terms of daily
active users and the number of people
using this platform so my prediction is
that we're going to see Facebook pretty
much be flat here in terms of their
growth or have much slower growth going
forward in terms of their daily active
users and such but we're gonna be seeing
high growth with Instagram for the next
couple of years and sure you could be
worried about the slowing growth of
Facebook but when Facebook also owns the
number two platform it's a fact that I
believe a lot of people overlooked and
the other thing you have to realize with
Instagram is that there are so many
different ways they could be making
money with that platform they could
follow what YouTube is doing and Google
is doing and have pre-roll ads involved
in the Instagram videos or they could be
doing ads inside the messenger there are
so many different ways they could do ads
within the stories but you know what
they're not doing it yet
and it means if they want to make more
money going forward all they have to do
is turn the dial and all of a sudden
they're putting ads on the stories of
Instagram or ads inside the messaging on
Instagram or ads before videos and next
thing you know they're making billions
and billions of dollars off that app so
there is so much untapped potential with
Instagram right now that is being
overlooked by people that are afraid of
investing in Facebook simply because of
the numbers they've seen in that most
recent earnings report and I am
incredibly bullish on Facebook just
because of Instagram alone now the
second reason I like Facebook as an
investment is due to the valuation when
you actually take a look at the
valuation of these shares and what I'm
going to be doing is comparing it to
their main competitor which is Google so
when it comes to digital advertising
there are two companies that are
absolutely dominating this space it is
Facebook and it is also Google and maybe
you're gonna have some others creeping
in there I'm sure Amazon is going to be
creeping in as far as digital
advertising goes but for the time being
Google and Facebook own this space so
according to eMarketer the u.s. digital
advertising market share between Google
and Facebook is that combined fifty six
point eight percent of the market so
they are absolutely dominating this
space so if you
bullish on digital advertising if you're
bullish on new media then you would be
interested in one of these two companies
either Facebook or Google and so when
you actually sit down and look at the
valuation of these shares you can see
that Facebook is not nearly as expensive
as Google stock so first of all looking
at the price to earnings ratio the price
to earnings ratio for Facebook is a 25.4
compared to a 33.7 for Google looking at
the forward p/e we see Facebook comes in
at a 22 while Google comes in at a 26
and looking at that price to earnings to
growth ratio Facebook comes in at a 1.2
while Google comes in at a 1.7 now do I
believe in both of these companies
absolutely I've owned Google shares in
the past I'm sure I will own this stock
again in the future but if you're
looking at these two companies if you
want to be involved in digital
advertising you're gonna want Facebook
or Google in between the two of them
right now I think you can get Facebook
stock at a bargain and the other thing
about digital advertising that we have
to mention here is that digital
advertising is still tiny and we just
now in 2017 reached the tipping point
where finally digital ad spending was
more than spending on TV advertisements
so according to Magna which is an
independent researcher digital
advertising beat TV advertising for the
first time in 2017 and it came in at 209
billion dollars for global digital
advertising spending or 41% of the
market and 178 billion dollars was spent
globally on television advertising at 35
percent of the market now where do you
guys think this is gonna go from here do
you think next year in 2018 TV
advertising is going to go through the
roof and digital advertising is going to
bottom out absolutely not
we're going to see TV advertising
continue to taper off while digital
advertising continues to climb and if we
understand the basics of supply and
demand here when you have more and more
people looking to advertise to the same
customer base you're going to see those
ad rates climb higher and higher and as
those ad rates climb you're going to see
companies like Facebook and Google
making more and more money
for that advertising space so more and
more people are going to be switching to
digital advertising and social media
advertising and moving away from
traditional advertising like magazines
and television and radio and all of that
money is going to be coming over to
Facebook and Google and whoever else is
going to become the third and fourth
player of the digital advertising space
and then my third reason for investing
in Facebook just comes down to the
fundamentals and looking at the balance
sheet Google and Facebook both have
wonderful balance sheets here in terms
of their financial strength and I want
to go ahead and highlight some of the
key points here from Facebook's balance
sheet and why I'm invested in them as a
fundamental investor so as of their
quarter to 2018 earnings report Facebook
has eleven point five billion dollars in
cash and cash equivalents and the other
thing that's amazing about Facebook is
that this is a company with zero dollars
in inventory they're not selling
anything they don't have any products
they don't have warehouses out there
full of inventory waiting to sell it
sitting on inventory there it's such a
lean business for them because they have
no inventory they're not sitting on
products they're just offering
advertisement space and making money
from advertisers so it's a super lean
business and that is what I love about
it the other thing is that they have
zero dollars in long-term debt there are
not a lot of companies out there that
you can say have no debt in terms of
their long-term debt now yes they do
have some debt that is owed in the next
12 months as terms of short-term debt
but they have zero dollars in long-term
debt and the number one thing that
determines the financial health of a
company is their debt load and I always
pay attention to the debt load of a
company when I'm investing in them
because maybe things are great for a
company right now if they have a sizable
debt load they're making tons of money
they're acquiring companies left and
right but it's working for them right
now
well as soon as we see the economy
retract and we see that turnaround for
them next thing you know they're paying
interest on that debt and that begins to
burden them and they are in poor
financial health the number-one thing
that's going to help a company in a poor
financial time or a poor economy is
having a boatload of cash and having
very little debt and Facebook hits both
of those marks for me again looking at
the balance sheet here Facebook has 90
billion
roughly ninety billion dollars in assets
and 11 billion dollars in liabilities
and so to put that into context here for
every dollar that Facebook owes they
have over eight dollars in assets so
think about that if that was you if this
was your personal situation maybe you
had a thousand dollars on a credit card
but you had over eight thousand dollars
in assets to back that up and you also
have enough cash on hand to pay off all
of your debts tomorrow that is the exact
situation that Facebook is in here they
have eleven point five billion dollars
in cash and cash equivalents and they
have 11 billion dollars in liabilities
so they have enough money to pay off all
of their debts and have five hundred
million dollars sitting there left over
that is a fantastic situation to be in
so Facebook and Google both have very
strong balance sheets but when you
compare the valuation of these two
stocks I'm leaning towards Facebook at
this point in time but anyways guys
that's gonna wrap up this video this is
why I'm an investor in Facebook stock
this is why I'm bullish on the stock at
this point in time I would love to hear
what you guys think down in the comment
section below
whether you are investing in Facebook or
you don't like this stock let me know
either way but thank you guys so much
for watching this video and I hope you
have a great rest of your day if you are
interested in learning more about
investing in the stock market I've
created a free course just for you the
link is in the description below here
are a few other videos you might enjoy
as well
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