Obviously, the most talked about news of the week was Facebook’s huge earnings disappointment, which lead to a nearly 19% drop in value for the company’s shares yesterday. With that being said, I’ve seen a lot of people now talking about getting into $FB because it’s now at some sort of discounted price while still being the same solid company.
I’ve often wondered the same thing in similar positions, whether to get into a good company that had a disappointing earnings report and is now trading at a discount to the previous price. But what I’ve often found, and what I believe to be the case here, is that we should shift our attention to another company in the same sector. After all, in the interconnected world we live in, macroeconomic forces have a huge impact on our investments.
What I mean is, if you were a buyer of $FB before this earnings release, than you know that the core business you are buying is Facebook’s online advertising services. So instead of getting into $FB at a discount, why not get into a company that has produced a higher quality advertising business! This is not a revolutionary call, but my suggestion right now is to get into $GOOGL.
As Warren Buffett has said (you see me quoting him a lot here because we should all be investors, not traders), “it is better to get a great company at a fair price than a fair company at a great price”. Facebook is a quality company now being offered at a discount. But if we are investing, than it seems prudent to turn our attention to the far better business at this time.
Alphabet offers EIGHT - count em, eight - platforms that have over a billion users, meaning advertisers have far more diversity of services to choose from to advertise their products. Facebook just has one, or maybe one and a half if you count Instagram. Facebook has warned that profit margins are going to continue to decline through 2020, while Google has shown remarkable stability in getting revenues to outpace costs. Google posted nearly 24% yoy growth in the advertising business in Q2, and, the hardware and cloud services business that is being counted on to drive Google into the future, saw a robust 36.5% yoy improvement. In addition, traffic acquisition costs for Google were down just slightly as a percentage of advertising revenue, even though total costs did rise.
This may be an opportunity to get into $FB, but I think the real upside play here is in $GOOGL.
Stack that paper friends.
LONG GOOGL LAST $1276.90
AF
Submitted July 27, 2018 at 09:59AM by alexfialfilet https://ift.tt/2OnBwPR
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