Facebook (FB) Stock Declines On Concerns Over Internet.org

Facebook Inc (NASDAQ: FB)

Facebook is the world’s largest social network. With billions of active users, great advertising campaigns and more, the stock has grown exponentially since its IPO. One of the bigger picture efforts of Facebook has been to connect the world to the internet; doing so through Internet.org. However, there are some big questions revolving around Internet.org that are causing FB to take a bit of a tumble. Today, we’ll talk about what investors are taking issue with. How it has affected Facebook’s stock so far, and what we can expect to see from the stock moving forward. So, let’s get right to it…

FB Stock Declines As Questions Rise About Internet.org

As mentioned above, Internet.org is one of Facebook’s bigger picture plans to connect the world. However, it seems as though Facebook’s plans are a bit biased, going against the very fiber of what the world wide web is all about. It all started as consumers started to complain about access issues. For example, a user in Indonesia decided to test the Internet.org app. In doing so, the user found that he didn’t have the ability to visit Google.com, the world’s most popular search engine.

This may not seem like a very big issue, but in all reality, it goes against the overall goal of Facebook’s Internet.org program and diminishes the basic morality behind net neutrality. That’s a big issue! It has been reported that users do have the ability to visit most internet properties including Facebook, Ask.com search, and more. However, if users want to search Google, they’re going to have to find another way to connect!

How FB Reacted To The News

As we know from history, the news moves the market. When good news surfaces about a publicly traded company, we tend to see a positive reaction in the market. Adversely, when negative news surfaces about a company, we tend to see negative reactions in the market. With that said, as one would expect, Facebook’s stock reacted in a negative way. During the trading session on Friday, Facebook fell to $92.77 per share after a decline of 1.74% as investors showed their disappointment with regard to the company’s connection plans.

What We Can Expect From FB Moving Forward

In the past, I’ve had a very bullish opinion of Facebook’s stock. However, these days, that opinion is starting to change. While I don’t think that Internet.org’s net neutrality issues are going to cause long term downtrends, I do believe that FB has other, bigger problems to contend with. Facebook is currently trading with a valuation of a high growth stock. The price to earnings ratio on FB comes in higher than 60! While I do see growth happening, I don’t think growth will ever get to a point that makes purchasing the stock right now a good idea. That opinion isn’t because Facebook isn’t a great company either. That opinion is based on the fact that the social network has already completely saturated the market. Recently 1 billion people logged into Facebook in a single day. That works out to be one seventh of the entire world’s population! The question now is how much more can we expect by way of user growth. While FB is working on better advertising plans, stronger security, and more, I have to imagine that at some point soon, we’re going to see somewhat of a user growth plateau; which will lead to declines in the stock.

What Do You Think?

Where do you think FB is headed and why? Let us know in the comments below!

[Image Courtesy of WonderHowTo]

Leave a Comment