Thread by @FoolMCochrane

1/ Obviously, whether anyone buys/sells depends on goals, risk tolerance, situation, etc -- but I believe $FB is a good investment and will beat the market over next 5 years. Whether it's a moral company or beneficial to society, I'll leave for others to debate. (cont)

https://twitter.com/TMFInnovator/status/1184164242351689728

2/ Despite all the headlines and FUD (fear, uncertainty, and doubt), DAUs and MAUs have held steady in North America, and grown elsewhere, past 2 years, demonstrating the incredible power of its platforms' network effects.

In 2019 Q2:

DAUs 1.59B, +8% YOY
MAUs: 2.41B, +8% YOY

3/ Let's assume the negative headlines never stop, and $FB takes its place among other "sin" stocks w/ tobacco, alcohol, and gambling. This will perpetually suppress valuation, but there's plenty of reason to believe it does not spell doom for investors. (cont)

4/ It's not just negative headlines hurting $FB, plenty of legit concerns, including legal expenses/fines, regulation, and antitrust issues. Privacy concerns abound too, though I think that if users were to abandon platform over privacy concerns that would have happened by now.

5/ These concerns are already manifesting. In 2019 first half, already settled and paid FTC $5B fine. To address privacy concerns faster, headcount has exploded, reaching 39.7K in Q2, +31% YOY. Expenses are rising, margins are falling, earning growth falling...

6/ Yet after adjusting for FTC fine and 1-time tax settlement, adj op margin would have been 39%, not 27%. Q2 EPS would have been $1.99, not $0.91. IOW, not sure if core business is in as dire straits as sentiment would lead us to believe. After adjusting...

7/ While obviously not ideal, with $48.6B cash on the balance sheet there is plenty of cash to pay off future fines and penalties.

IOW, even w/ rapidly rising costs, numbers just don't look that bad, core platform looks healthy, etc.

Now let's talk about $FB's #optionality...

8/ Optionality is concept from @DavidGFool, meaning company has multiple possible futures. W/ 4 platforms of 1B+ users, $FB has many, many possible futures w/ new revenue streams ...

fool.com/investing/2017…

9/ Future #1 - E-commerce

Instagram Checkout, launched in March, might be $10B opportunity according to Deutsche Bank.

Survey: 43% Instagram users likely to use feature, 83% who have used feature likely to do so again.

From db.com/newsroom_news/…

10/ Future #2 - Payments

Yes, @Libra_ is off to rocky start. And it might never do diddly squat (technical term). But Libra does not have to replace world's currencies to make impact on $FB's bottom line.

11/ Future #2 - Payments (cont)

Consider low-hanging fruit such as int'l remittance, w/ $689B being sent from foreigners to home country in 2018 alone. Currently that is costly process. $FB enabling process to be done on Whatsapp? Game changer.
worldbank.org/en/news/press-…

12/ Future #3 -- VR/AR

@oculus is a #VR hardware, software, and developer ecosystem.

Oculus Go, a VR headset available at a starting price of $200, no need to be tethered to other hardware.

Oculus Quest, a higher-end stand-alone VR headset for $400.

13/ Future #3 -- VR/AR (cont)

Thus far, admittedly not much to show for the Oculus acquisition ($2.3B deal in 2014), but still early innings.

Global AR/VR market was $11.4B in 2017, projected to reach $571B by 2025, for 63% CAGR.

fool.com/investing/2019…

14/ Conclusion:
Could be wrong, but $FB looks like an investment w/
growing revenue
rising costs (has to end at some point, right?)
lots of cash
growing user base w/ extremely powerful network effects
reasonable valuation
optionality in spades, giving it multiple possible futures

15/ Full disclosure:

Long $FB, about 6% position

I suspended my FB account in 2012/13 and haven't logged on once since.

Recently created Instagram account to follow my son, and I hate the platform. Feel old and out of touch every time I log on.