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Facebook Still Looks Attractive

Facebook Still Looks Attractive

Facebook shares rose this morning after the firm reported better than expected first-quarter results, while posting growth in daily and monthly active users, which we think is indicative that the firm's all-important network effect, a key source of its wide economic moat, is intact.

The results also provide some support for our view that the firm can regain user trust and weather the Cambridge Analytica and overall data privacy issues it is currently facing. We don't expect a significant long-term headwind to Facebook's platform, operations, or wide-moat rating.

Based on Facebook's first-quarter results and management guidance, we slightly adjusted our revenue growth assumption upward, but this did not move the needle on our $198 per share fair value estimate for the firm.

Despite the rise in shares today, we still see the firm as undervalued and believe investors have been presented with an attractive margin of safety.

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About the Author

Ali Mogharabi

Senior Equity Analyst
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Ali Mogharabi is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers Internet and software companies.

Before joining Morningstar in 2016, Mogharabi was a senior equity analyst for Singular Research, where he covered the technology and biotechnology sectors. His previous experience also includes roles as a senior equity analyst for B. Riley & Co., associate analyst for Roth Capital Partners, sales consultant for Oracle, and business development consultant for Aerospike.

Mogharabi holds a bachelor’s degree in economics from the University of California, San Diego; a master’s degree in business administration from University of California, Irvine; and a master’s degree in applied economics from the University of Michigan.

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