Despite Scandal, It's Time to Like Facebook

04/10/2018 5:00 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

Everyone hates Mark Zuckerberg these days; the whole Cambridge Analytica scandal is dominating news headlines, observes Ian Wyatt, editor of Million Dollar Portfolio.

Congress is asking Zuckerberg to show up on Capitol Hill. And the Federal Trade Commission is investigating Facebook (FB) data practices.

Bad news has investors selling Facebook stock. Shares have dropped 19.4% since early February.

Now, everyone agrees that Facebook was made mistakes. The company’s been playing fast and loose with our personal data. It makes me angry. But at the end of the day, we’ll all continue using Facebook.

It also creates a timely opportunity to buy Facebook at a discount. Facebook isn’t going anywhere. And today, we can buy the stock at an attractive price.

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Wall Street analysts are currently predicting 36% revenue growth in 2018. Meanwhile, the company’s earnings per share could jump 34% to $7.22.

That means Facebook is growing earnings at twice the pace of the AVERAGE company in the S&P 500. Facebook stock trades at a forward price-to-earnings (P/E) multiple of 21.7.

That’s a premium to the forward P/E of 16.5% for the S&P 500.

Facebook stock has always traded at a premium. That’s because of the company’s superior growth rate. Typically, Facebook stock trades with a higher P/E.

Eventually, the Cambridge Analytica story will die. The FTC will collect a few billion in fines. And Facebook will resume its upward trajectory. I like the stock below $165.

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