Analyst Note| Ali Mogharabi |
We are maintaining our $407 Facebook fair value estimate; after nearly a 5% decline on Oct. 4 the wide-moat firm is now trading in 4-star territory. The stock has been hit by many negative headlines regarding the firm’s policies, in addition to its main properties not working for a few hours. While the stock will likely remain under pressure from negative news (the outage impact will likely be negligible), we think Facebook’s network effect remains intact. We remain confident that while the firm’s user growth, engagement, and monetization may weaken somewhat, with nearly 3 billion monthly active users worldwide, a reversal of its platforms’ flywheel effect remains unlikely. In addition, while some large brands may abandon Facebook, we believe small and midsize businesses will continue to find Facebook’s properties one of the most efficient ways to reach consumers.