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Sydnee Gatewood
Sydnee Gatewood
Articles (3566) 

Ruane Cunniff Comments on Facebook

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February 26, 2021 | About:
Facebook (NASDAQ:FB) grew revenues 22% in 2020, meeting pre-COVID expectations for the year despite facing headwinds from a weak economy. Not surprisingly, in a year that saw parts of the globe locked down for extended periods, engagement with the Facebook family of apps strengthened. The relatively new areas of shopping and Reels short videos are gaining traction. Growth in ad revenues increased in Q4, largely driven by the acceleration of e-commerce, and sales are booming at Facebook Reality Labs, the division that produces virtual reality headsets. While Facebook turned in strong financial performance in a difficult environment, 2020 was not without turmoil as political discourse raged on the company's apps. As part of its year-end earnings announcement, management indicated that it intends to deemphasize political content in the newsfeed. In our view, regulation remains a significant risk for the company. That said, we believe this risk is reflected in the shares with Facebook trading for ~24x consensus forward earnings, a near market multiple for a dominant social media enterprise whose earnings we expect to grow far in excess of the overall economy for years to come.

From Ruane Cunniff (Trades, Portfolio)'s Sequoia Fund 2020 annual report.

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