Facebook – is it still a good investment?

Facebook stock has lost over 30% in value just during the last 2 months. To this respect, a lot of investors are asking if the social network behemoth still represents a good long-term investment.

It is quite evident that Facebook, as a platform, is losing a lot of users and thus investors are afraid that this will continue to impact the share price.

Various famous celebrities like Kanye West, Adele, Justin Bieber and other are deleting their accounts and switching to other social platforms.

 

Where are the lost users going?

Something important to keep in mind is that the majority of users of Facebook are switching to Instagram, which is a cleaner social platform and is owned by Facebook!

 

Let’s have a look the trend

When Instagram was founded, way back in 2012, Facebook started to decrease in popularity (see chart below).

The question we all ask is: But why did Facebook been so stupid in creating its own competition?

I think that the management of Facebook were thinking ahead of the curve based on the fact that people’s trends change and with social media this is even more evident.

If they did not create the competition themselves, most probably someone else would have joined the party and they would have lost the game.

What Facebook are doing is similar to what Apple did a few years ago. If you might remember Apple ‘killed’ their main product, The iPod, by issuing the iPhone. In the short term they received a lot of critique but over time their strategy ended up being a winner.

 

Conclusion:

I still remain in favour of Facebook and think that my accumulation strategy on these shares, that is to buy more each time they fall by 10 dollars, will be successful over time. I already bought shares when the price was $150…if it goes down to $140, I will buy even more.

Furthermore, looking at some analysis, we can notice that Instagram, unlike Facebook, is more diffused globally which I think will help the company to grow even more.

Do you agree or you have a different opinion? Leave a message in the dialogue box below!

 

Article written by Luca Discacciati

 

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Past performance is not a guide to future results. This information is being provided solely for information purposes and should not be deemed or construed as investment advice, advice concerning particular investments, advice concerning investment decisions, tax or legal advice. Similarly, any views or opinions expressed are not intended and should not be construed as investment, tax and/or legal recommendations or advice.  No person should act upon any opinion and/or information in this document without first obtaining professional advice.

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