3 Reasons to Buy Facebook

The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics around the investing world.

Facebook is one of the most talked-about companies right now -- and the talk seems mostly negative. John and David will go over three reasons to buy the company. Facebook has more than 1 billion users. That is an incredibly powerful platform of people. Critics wonder why Facebook hasn't grabbed more ad dollars. The answer is that it takes time and effort. And just because General Motors didn't find a good ad solution, that doesn't mean other companies won't. Facebook will always be a work in progress.

Critics may also say Facebook has a mobile problem. But with 500 million very engaged mobile users and lots of ideas, over time, Facebook will discover lots of ways to monetize its mobile platform.

The final reason to buy shares is that Facebook, in the future, will be more than just ads. Could it create a competitor to LinkedIn or a commerce network that rivals eBay? And let's not forget its OpenGraph initiative that will drive developer engagement and create all sorts of opportunities. It's easy to discount Facebook's recent performance as the beginning of the end. But with a growing base of more than 1 billion users, $10 billion of capital to invest, and talented folks looking at tons of data, Facebook is really just getting started.

The mobile revolution is still in its infancy. With so many different companies out there, it's not always easy to identify the winners. Fortunately, The Motley Fool has just released a free report on mobile named "The Next Trillion-Dollar Revolution." Inside the report, you'll learn more about an outstanding company that is well positioned to profit from this growing trend. Hundreds of thousands have requested access to previous reports, and you can access this new report today by clicking here -- it's free.

David Meier has no positions in the stocks mentioned above. John Reeves owns shares of Google. The Motley Fool owns shares of Facebook, Google, and LinkedIn and has options on Facebook. Motley Fool newsletter services recommend eBay, Facebook, General Motors, Google, and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 13, 2012, at 6:13 PM, hilsonvalli wrote:

    What is the point of this post? How can you hype FB when there is the huge number of shares coming off lock-up, when the valuation is far overblown versus more-efficient competitors such as Google, and when there is the overhang of millions of sours FB shareholders who will provide constant selling pressure should it ever rise.

    The price/revenue multiple is going to compress, and when it does, FB is dead money. What is the MF answer to all of the above?

  • Report this Comment On October 14, 2012, at 12:57 AM, rigal53 wrote:

    Here’s how you can find out if a company will rise to the top (Google) OR go bankrupt (Facebook)

    Does the company produce anything that people cannot live without? If YES then it will rise to the top. If NO then it will become bankrupt.

    FACEBOOK

    What does Facebook produce? Social media or in other words - NOTHING.

    Let’s assume Facebook crashed or a hacker attacked with a virus that took Facebook down for months. How would that affect people? IT WOULDN’T AT ALL. Life would go on as if nothing happened. You could visit your friends, call them, send them a text or an email. In 3 months you wouldn’t remembered that Facebook ever existed.

    Now let’s apply the same logic to Google.

    What does Google produce? Everything ….i.e., KNOWLEDGE and we all know knowledge is POWER

    Let’s say Google goes down. How would it affect people? Very seriously!

    Without Google I wouldn’t know how to get anywhere or find a business phone number (MAPS), how to fix my car by searching car symptoms and getting results of various forums that have answers to my car issues, in the end saving me a lot of money by not having to go to a mechanic to find out the problem is. The list of questions that I ask Google everyday is endless

    I always wondered how people knew anything before Google and realize how limited their resources were (a few encyclopedias in a library). I tell my friends one day Google will rule the world. They will attain all earthly knowledge and will have all the answers. And everyone will depend on Google. God forbid Google ever shuts down. And don’t try to compare Google to anything else…Yahoo or Bing or whatever. Google is like asking a college professor and Bing is like asking a rock.

    That’s why GOOGLE will succeed and FACEBOOK will be history…or to better phrase it FACEBOOK will be MySpace. Remember before MySpace there was hi5.com and whimit.com and netruss.com. So the lesson is MySpace was not the first social media site and Facebook is not the last.

    I am short Facebook and it made me a lot of money…. This is not a disclosure…this is advice. I suggest you consider it seriously.

    If a person is working hard then he doesn’t have time to be telling his manager what a hard worker he is because he’s to busy working and he’s boss will probably see it from his products. But if an employee is slacking off then every chance he gets he will brag to his manager about what a hard worker he is, because he doesn’t want his manager to think he’s a slacker.

    If Facebook was making money it wouldn’t have time to brag about how it’s making money and inventing new methods of making money. And if Facebook was making money then it would feel obligated to defend itself by going out and telling everyone that they’re making money. The products would be self-evident. But so far their products (Gifts, Collections, Promoted posts, etc) and whatever else they say will be the next money making machine have not show success. I don’t know of anyone who is stupid enough to buy stuff through Facebook. Well there are those that are stupid enough, they’re teenagers. The problem is that they don’t have the money… and when they get the money, by getting a job for the first time, they will be much smarted, because they will realize what it takes to earn money and hence will not buy anything on Facebook either.

  • Report this Comment On October 14, 2012, at 9:34 PM, dog82 wrote:

    @hilsonvalli They are trying to pump the stock because they have bought FB since May and have been bleeding money every since. See:

    http://www.fool.com/investing/general/2012/05/24/why-were-bu...

    http://www.fool.com/specials/realmoneyports/real-money-portf...

    FB is a SELL until it proves that it can grow its revenue to deserve the ridiculously high PE. Enough said.

  • Report this Comment On October 15, 2012, at 12:31 AM, hilsonvalli wrote:

    @Dog82, right, I knew that. Just would like MF to honestly address these issues rather than simply "talking their order book".

    MF used to have some integrity beyond the almighty buck, seemingly lost now.

  • Report this Comment On October 17, 2012, at 11:58 AM, TMFRedRam wrote:

    Hi All,

    As an upfront disclosure, I've recommended Facebook.

    Having said that, it's annoying to see people reiterate the idea that Motley Fool writers would ever write something for personal gain. Here are just two reasons to ponder:

    1) The link to the real-money portfolio that dog82 supplied points out that the Fool bought a little over $1,100 worth of Facebook. Even if it went to $0, the company would probably be able to manage because a) never risk what you can't lose and b) it's not just some guys in a basement, it's a real company.

    2) This article has been tweeted 20 times, and has 5 recommendations. That's pretty close to par for the course. There is no. possible. way. that a Fool article, or series of articles, could move the market on Facebook. The company has a market cap of $43 billion with over 2 billion shares outstanding. No one in their right mind would author a minute long video to try and move the stock price.

    Clearly, there is a discussion to be had about the stock's value, and the company's long-term prospects. Disagreeing is part of what makes us "Motley", and you can find ample articles around the site deriding Facebook.

    What should also be clear is that we can't and won't pump a stock. It's not possible, and there is no gain to be had. Thanks for reading.

    Cheers, Andrew (Fool contributor)

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