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There Are Major Differences Between Facebook And The Other FAANG Stocks. Just Look At The Financials

Oh no, the intern is talking about stocks...

One of the benefits of no-research investing is that shiny objects sometimes do actually have some underlying value. I had the fortune of grabbing some millennial staples in the heady days of 2017 and, with a trade war looming, though it might be wise to re-examine some of my holdings with the help of our new friends at StockPitch. StockPitch wants to prove that their platform is so easy to use, even an intern from a non-target school can figure out how to use it. So naturally, the state school kid was chosen as the guinea pig.

Turns out, when your strategy is to invest in companies that make apps you like, you’re going to have some duds, but you’re also going to pick a few winners. Facebook, it would appear, is one such winner. Their IGTV-induced all-time high prior to the market slide we saw on Monday may have been temporary, but it wouldn't be surprising if we saw those numbers again sometime soon.

Although I've only taken some basic finance courses and have invested a little myself, I consider myself an amateur. I've noticed that Facebook's financials are a little different than the rest of the FAANG's. So I'm going to give my best effort to do what few millennials would even consider doing. Research.

Now let's walk through some of the numbers

1. The Grandaddy of them all (according to what I've seen on Instagram): EBITDA


As you can see, there is consistent growth in both the EBITDA and even some growth in the EBITDA margin. This is especially impressive given that there is still growth in the LTM column, despite a massive scandal that sent the price of their stock down a couple notches. The scandal made many wary that Facebook would lose users, and ad revenue, but at this point, it seems society accepts that someone who is determined is going to find our data no matter what. In an era where people voluntarily bug their own homes for Amazon, I don't think people should be too worried about people seeing their leaked photos from Freshman year of college where they look a little too drunk for their age or those embarrassing middle school photos where you're decked out in Aeropostale and cargo shorts.

2. Returns compared to Alphabet, Netflix, Apple, and Amazon.


The website is profitable. Very profitable. As you can see, Facebook not only has a larger EBITDA margin than the rest of the FAANG, but the returns on assets, equity, and invested capital crush the remainder of the FAANG's median. In fact, they look like the Golden State Warriors of the FANG. The only company beating Facebook in any of those areas is Apple, with an ROE of 40.9%. I understand that returns aren't the only way to value a stock, but these numbers show that Facebook is efficient with their money and continually create substantial value for their shareholders in all areas.

3. Quick Ratio


Holy moly. Not only do they have a quick ratio of 9.6, but it's 860% larger than the median quick ratio of the other FAANGs. In a market, where a crash feels like it could be around the corner at any moment, Facebook won't be immune to failure, but with that many current assets, they should be able to weather the storm.

4. P/E and PEG


Although Facebook does seem very secure, it's quite clear that investors aren't as excited about future products compared to the rest of the FAANG. Much of this criticism is fair. Although Facebook continues to innovate and expand, their model is ad revenue with some Facebook Live shows on the side. The other FAANG companies provide services, make products, produce content, or a myriad of all three. Facebook is more one dimensional, and it will be interesting to see how they diversify in years to come.

Although my evaluation of the foundations of Facebook is very simple, I'm going to refrain from saying anything else because I'd be bullshitting if I was throwing out more numbers. I'm not saying Facebook is going to rule the world or take off to $1000 a share, but the numbers make it pretty clear that they are in a secure position. And Zuck navigating around Senate questions with Clarence Thomas-esque ability, I don't think Facebook will be hitting any new regulatory road bumps for the time being. Especially since they made that super sappy commercial.

All Charts provided by StockPitch.

Facebook's stock tumble cuts $36 billion from the social network's market value [MarketWatch]

Is Alexa Listening? Amazon Echo Sent Out Recording of Couple’s Conversation [New York Times]



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