Facebook Inc. (NASDAQ: FB) has capital growth potential following its 7% decline over the past year.
The social media company is introducing new features to its mobile apps, responding to privacy concerns among users and is increasing the appeal of its apps to business customers.
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The company is investing in new apps to improve its competitive position. For example, its new WhatsApp Payments service enables users to send and receive money quickly and easily. It has been popular in test markets, according to the company’s fourth-quarter 2019 results. Facebook expects to roll it out across new markets in fiscal 2020.
In addition, the business is investing in improving its private messaging mobile apps, which enable users to have private conversations with a limited number of people at one time. Facebook plans to turn them from apps that are focused on text messaging to social platforms that include a larger range of features in 2020.
Facebook also plans to introduce new features across its services. For example, the company will make it easier for users to switch between its various apps and will seek to increase their speed. This could improve the experiences of its users and increase the amount of time they spend on the apps.
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Facebook tested its Checkout feature on Instagram in fiscal 2019, making it easier for users to shop directly with businesses that use the platform. The company plans to roll out new functions of the feature during 2020, which could attract a larger number of businesses to its Instagram platform and encourage them to advertise more widely across Facebook’s apps in the coming years.
Additionally, Facebook is working to address the increasing privacy concerns among its users. For example, it currently has over 1,000 engineers working on privacy-related projects. It will also roll out a new privacy check-up tool to over 2 billion users in fiscal 2020. This will provide them with greater control over their data and potentially assuage concerns regarding privacy. This may strengthen Facebook’s customer loyalty levels, enabling it to grow the size of its user base.
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Facebook’s financial performance could be negatively impacted by the spread of coronavirus in 2020. The outbreak may cause a slowdown in economic activity across many of the company’s key markets, which could lead to reduced demand for advertising. In addition, the company reported a 34% increase in total expenses in the fourth quarter. This resulted in its bottom line growing just 7% for the year, which suggests it is struggling to translate its top-line growth into higher levels of profitability.
The company is seeking to become increasingly diversified to reduce its reliance on any one area of its business. To achieve this goal, Facebook is adopting a range of different approaches to increase the number of businesses that conduct transactions through its apps. For example, it is making it easier for businesses to sell products on its apps, simplifying the process through which its users communicate with businesses directly and is aiming to make payments within its apps faster and more secure. This could broaden the types of businesses that use its mobile apps and may catalyze its financial performance.
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Analysts projecet Facebook will record a 41% increase in earnings per share in 2020, followed by growth of 20% in 2021. The price-earnings ratio of 25.2 suggests it offers good value for money.
Disclosure: The author has no position in any stocks mentioned.
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