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Analysis of Facebook share price

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EU wants to discipline Google, Amazon, Facebook, Apple and Microsoft (GAFAM)

18/12/2020 - 09h37

Faced with the numerous complaints against the digital giants, the European Union finally wants to be respected. Brussels has decided to adopt rules to make the GAFAMs comply with the standards.

Elements that can influence the price of this asset:

Analysis N°1

Figures and statistics on advertising spending on the Internet are of the utmost importance since they represent the bulk of the group's sources of income.

Analysis N°2

We will also follow the forecasts concerning the activity of games hosted on Facebook, which have followed a relatively positive trend in recent years.

Analysis N°3

We will also monitor the development of new features and technical developments from Facebook in different areas of involvement.

Analysis N°4

Figures on the use of different media and media (PC or mobile) can also influence Facebook's activities and therefore its results.

Analysis N°5

The group also faces some problems related to the use of personal data and we will therefore monitor events related to these problems but also the implementation of solutions to protect users and reassure them.

Analysis N°6

Facebook's development in certain markets that are still closed to it, such as the Chinese market, is also a factor that could influence this action.

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General presentation of Facebook

The American company Facebook was founded in 2004 and consisted solely of the social network of the same name that we still know today. Since then, its activity has grown considerably. 

But this company is above all specialised in online social networking services with an activity that can be divided into three main groups

  • Networking services with information exchange and photo sharing services for individuals.
  • The operation of an application and website hosting platform for developers.
  • The operation of online advertising space.

Of course, the largest part of Facebook's turnover, 92.2%, is generated by the sale of advertising space. Facebook generates only 45.3% of its revenue in the US.

Thus, the Facebook share was introduced on the stock exchange in May 2012. This event created a buzz as the stock listed at $38 was valued at $104 billion, the highest value ever for a new IPO. Over 400 million shares were sold for $16 billion.

Facebook has since acquired Instagram, WhatsApp and Oculus VR, which has allowed it to greatly expand its revenue and presence in the new online technology sector.

Analysis of Facebook share price
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The major competitors of Facebook

The Facebook Group, as you already know, exercises its activities in the social networks sector. In this sector, and following the strong success it has experienced, it has a number of large competitors that exercise similar activities and are quoted on the stock markets, these we will examine here in detail.

LinkedIn

LinkedIn is a social network dedicated to professionals, it can be considered as a major competitor to Facebook.

Twitter

Twitter, due to its operational method similar to that of Facebook is currently its major competitor and is also intended primarily for individuals.  

Other competitors

Of course, other small companies and start-ups represent possible competitive threats to the social network company Facebook in the coming years but here we have chosen to examine only the major existing competitors.

The major partners of Facebook

Le Monde

Three years ago, Le Monde announced a partnership with Facebook, which has just been strengthened in 2018 with the launch of Plan B, a weekly programme devoted to environmental issues, the 44 8-minute episodes of which will be broadcast simultaneously on the daily's Facebook page and on Facebook Watch.

Solocal

Also in 2018, SoLocal, a company specialising in local digital communication for businesses, signed a strategic partnership with the Facebook group for the launch of a new offer entirely dedicated to the video format, Social Video, which consists of a tailor-made offer of turnkey advertising videos. This new offer joins a range of three offers launched last June which are mainly focused on effective local communication on Facebook with Social Tract, Social Clic and Social Réseaux.

L'Oréal

In 2018, the L'Oréal group, as part of its digitalisation and as a French giant in the cosmetics sector, partnered with Facebook in order to offer augmented reality fitting experiences on a dozen of its brands and using Facebook's augmented reality platform and broadcast on Instagram.

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The factors in favour of a rise in the Facebook share price:

Since its initial IPO Facebook shares have engendered serious interest among investors worldwide and for good reason. It is undeniable that this asset offers numerous advantages for trading online which we will examine in greater detail here through a summary and review of its major benefits:

  • The first thing that can be noted concerning the Facebook Company is the company’s ability to increase its success and profitability year by year. The financial position of the company continues to improve steadily and profits are constant. These particular characteristics ensure that investors are happy and therefore Facebook shares are considered a popular choice for stock market portfolios.
  • We can also note that the Facebook group displays an excellent market penetration on the international level. It actually touches more than 66% of Internauts in the United States and even 46% of Internauts in Asia including China which is a market sector recognised as being difficult to penetrate. In Europe over 46% of Internauts have a Facebook account that they use regularly.
  • Although Facebook has a number of competitors in the form of other social networks such as those we detailed previously it remains a major player in this activity sector, keeping its position as leader in terms of market share. The company share price therefore benefits from this consistent popularity by attracting new investors. The success of this social network is mainly due to a particular sociological phenomenon in its users of sharing and dependency which is a real guarantee for the future of this platform. 
  • Finally we should point out that the boost in targeted acquisitions by Facebook over the last few years has also contributed to its success, such as the acquisition of Instagram in 2012.

The Facebook group has a number of opportunities open to it in the coming years which could enable the company to gain a larger share of the market and increase its profitability. Over the last few years we note a major increase in online advertising by companies. As Facebook’s profitability model is primarily based on this type of revenue it would be safe to say that this company can only benefit from such an increase.

In the online gaming sector the Facebook group still has much to gain as the results obtained over the last few years are consistently positive.

The factors in favour of a drop in the Facebook share price:

As we have just seen, the financial strength and the rather positive future prospects of this company, suggests that this stock market asset is particularly interesting for investors. But of course, this company does not only present advantages and it is also necessary to know its main disadvantages before starting to trade online.

Among the main disadvantages of Facebook shares, we can mention a current lack of effectiveness of the advertisements on the pages of the social network, which is struggling to recruit new advertisers, despite a strong demand.

We can also notice that the Facebook application for smartphones, although it has been praised by the critics for its quality, it generates less revenues than its online version, especially because of lesser follow up of advertising links. However, the users of the social network increasingly prefer smartphones to computers which may eventually lead to lower profitability and increasing difficulties for the company to recruit new advertisers.

Facebook also faces some legal battles, particularly with regards to the disclosure of private information. Even though the company has made real efforts in this regard in recent years, the use of personal data by the social network is still controversial and could have negative repercussions in the future.

Finally, one of the last weaknesses of Facebook concerns its increasingly strong exposure to an increasingly aggressive competition. Maintaining its position as the leader in this sector will depend mainly on its ability to innovate in order to remain constantly on the top of the trend and to offer features that will appeal to the general public.

In conclusion, even if Facebook has to face certain obstacles to maintain its popularity and a rising profitability, the objectives remain reachable and this share counts with a positive feedback from analysis experts. It is however advisable to carefully follow the news about the company by subscribing to a newsfeed or by using a specialized site such as that of your online broker because this company could have a strong reaction to advertising effects.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions.

Frequently Asked Questions

How to buy Facebook shares?

There are several means of trading in American Facebook shares online. You can in fact choose between two main methods at present, the first being the opening of a CFD trading account with an online authorised broker or the opening of a share account with ETFs. You simply need to open a trading account online and deposit the capital you wish to invest then take position on the upcoming trends of this asset.

What is the average progress made by the Facebook share price on the stock markets?

Since the initial quotation in 2012 Facebook shares have strongly increased in value, by nearly 300% in fact in around seven years. However, in 2018 following a scandal that affected this company, the Facebook share price fell by 26%. But we note that from the beginning of 2019 this asset succeeded in rebounding effectively and recovered over 19% in a single year. Since then the share price has succeeded in recovering to the level it reached at the beginning of 2018.

What are the notable strategic acquisitions completed by Facebook?

The Facebook Group has implemented a development and expansion strategy of its activities based to a great extent on targeted acquisitions. It is in fact the same strategy that is followed by other large businesses in this sector such as Apple and Google. Concerning Facebook, this group has notably acquired the Instagram, WhatsApp and Occulus VR companies.

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