[NASDAQ: FB]: While Facebook’s revenue growth has slowed down year on year, the company’s core fundamentals are getting better. The company is transitioning from placing ads in the news feed to search advertising through the Facebook Marketplace. Facebook marketplace, is a more sustainable revenue stream for Facebook Inc (NASDAQ: FB) since it more targeted at shoppers. Facebook is also moving to monetize its Facebook stories, as well as grow Instagram-based advertising. In essence, Facebook ad revenues may slow down in the short-term, but once its new revenue streams mature, Facebook’s shares will grow too.
As such, even if the global economy were to slow down in 2019, Facebook has the fundamentals to make a strong showing in the market. That’s because, on top of having the potential to open up new revenue streams in advertising, the company has other core strengths that give it good prospects for growth in 2019. One of the most watched market determinants in 2019 is the Federal Reserve interest rates hike next week. If rates are hiked, then the stock markets could slow down significantly.
However, even with this risk hanging over the market, Facebook (FB) stands in a good position to grow due to its expanding revenue sources, as well as the social aspect to it. Since the usage of social media has no connection to consumer credit and spending, Facebook’s revenues are pretty much guaranteed in this market. This could play a role in supporting Facebook’s stock even in a slowing market, where low consumer demand, could hurt many companies revenues.
On top of that, Facebook Inc (NASDAQ: FB) has a host of other factors supporting its growth. The most important of these is that Facebook has a negligible debt. The company has a current ratio of 9, which means that its revenues are high enough to cover its debt obligations many times over. This makes Facebook completely unaffected by an increase in interest rates by the Federal Reserve.
The only factors that Facebook investors would need to put into consideration is competition from companies such as Google. For instance, Google is big on search, and Facebook is coming into this market. Facebook’s competitive advantage in the social aspect of its search. With close to 3 billion users annually, search advertising would be big business for Facebook. For context purposes, Google’s ad revenues grew by 33% in Q3. This is exponential growth, and if Facebook can tap into this market, and leverage on its user-base, its value in the market could grow exponentially as well.
Therefore, Facebook Inc (NASDAQ: FB) is insulated both from macroeconomic strains in the economy and from extreme competitive pressures. The company is also supported by its dominance in the social media space. It is the dominant player in social media, with over 3 billion users all across the world. This means that the company has a strong enough user base to come up with new revenue streams and succeed in them, just like it is doing at the moment, by transitioning into search.