Facebook (FB, Financial) controls the world’s most dominant social networking platforms, Facebook and Instagram. The company’s unprecedented global reach and ad-targeting capabilities have made Facebook and Instagram some of the most sought after and effective advertising platforms ever created. Although the company will not be immune to the near-term disruption caused by the coronavirus, we believe the long-term outlook for its digital advertising remains as bright as ever. Facebook is trading at a discount to the S&P 500 Index on our two-year forward estimates, even though those estimates include no contribution from valuable assets, like WhatsApp and Messenger (among others), which Facebook has yet to monetize. We believe this is an attractive valuation for a company that is projected to grow its revenue in the double digits for the foreseeable future, and we believe that Facebook’s operating margin potential is substantially higher than what the company is likely to report in the coming years.
From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund first-quarter 2020 shareholder commentary.
