Despite the ongoing negative news that continues to surround Facebook (FB) and its handling of data privacy, we remain confident about the firm’s ability to maintain its long-term competitive advantage and remain one of the top players in the digital advertising space. We are maintaining our $186 fair value estimate per share on wide-moat Facebook. Based on the firm’s user and user engagement figures throughout 2018, the potential for further Instagram monetization, and Facebook’s efforts to address data privacy and security issues, we think the stock remains an attractive investment as this wide-moat name is now trading at a 28% discount to our fair value estimate . We must also note that in early December, the company’s board also upped its share buyback program by $9 billion, displaying confidence in the firm’s future, in our opinion. Facebook has already repurchased $9.4 billion of its shares during the first three quarters of 2018.
On Dec. 18, The New York Times published an article stating that Facebook had shared user data with a variety of large and well-known firms, including Microsoft, Amazon, Spotify, Yahoo, Netflix, and Huawei. Facebook responded by saying that the firm’s agreements or partnerships with other companies did not include sharing user information without user consent. In addition, the company did not sell user data to any of the other firms. Rather, the goal of the programs was to provide ease of use for its users with the integration of the app with different devices, as well as usage of Facebook login. While Facebook could have been more transparent to its users regarding where, how, when, and by whom their data would be utilized, we believe the firm has taken those steps to improve transparency this year. Looking ahead, we still believe that Facebook's reputation will overcome these reported transgressions.
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Ali Mogharabi does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.