Travis Farral is keenly aware the digital age has swallowed up a lot of his privacy. He’s reminded of this every day on Facebook (FB, Financial).
“Facebook knows me pretty well,’’ Farral told GuruFocus. “It’s scary how well they know me.”
Farral has made a career working for multinational companies that hire him to make sure their secrets remain secret. His current job as a security strategist is to gather intelligence and identify threats and breaches in security.
He also happens to be one of 2 billion active users of Facebook, who has sobering news for a public who may think that privacy breaches are rare. In his opinion, we are always -- not some of the time -- vulnerable to having our personal data collected and distributed to outside sources. And in some cases, it occurs without our knowledge or consent.
“For us, it’s a case of just understanding that this is reality, this is the way things are,’’ he said.
Farral isn’t an investor of Facebook, but if he owned it today, he would keep it, he said.
“I don’t believe their challenges in controlling privacy are insurmountable,’’ the cybersecurity guru told GuruFocus. “Yes, they have work to do but that doesn’t decrease the long-term value of the stock, in my opinion.”
These days, you can’t control your digital footprint even if you decide you don’t need a smartphone and you deliberately try to control how you act online.
It’s just not the social media network known as Facebook collecting our names, email addresses and favorite pot pie, and sharing this information with others.
It is the restaurant, where credit card companies derive records of our favorite menu items to share with merchants.
It is the shopping center, where video cameras grab our images and copy to a cloud.
It is the grocery store, where our reward card is tagging our purchases to help grocers manage their inventories.
Our behaviors, our words and our actions, our likes and our dislikes, are often on display for everyone to see, said Farral, who lives in Fort Worth.
“This is a fundamental problem that future generations will just have to deal with because we’re not going back,’’ he said.
Paying the cost
In recent days, Facebook has become the target of criticism after 85 million users became aware that their personal information had been shared with a British firm that handles political campaigning.
As a result, the social media giant’s stock has tanked by more than 18% since the beginning of the year while some celebrities and others have threatened to deactivate their accounts.
Facebook was among the top gainers on Wednesday after one of the worst trading days in the month of April in market history. On Thursday, the California-based social media giant was making a comeback, up more than 2% to over $158 a share in late morning trading on Thursday. Its 52-week range is $138.31 to $195 a share.Â
Facebook is expected to report its latest earnings later in the month. GuruFocus, however, ranks it 9 out of 10 in financial strength and 10 out of 10 in profitability and growth. The company has a Piotroski Score of 8, indicating a very healthy financial situation. Its ratio on earnings per share is 28.68 versus an industry median of about 33.
In the fourth quarter, Facebook reported a 47% jump in total revenues to nearly $13 billion. That compared to revenue of $8.9 billion for the same period in 2016.
The growth in revenue was largely attributed to the company’s advertising revenue, which, at $12.8 billion, soared by 48% compared to $8.6 billion in the fourth quarter of 2016.
The company generated over $17 billion in free cash flow and ended the year with almost $42 billion in cash and investments.
2017 was a year for hiring. Facebook's workforce grew by 47% to over 25,000 employees. Many of the new positions have been dedicated to improving security and safety. A total of 1,900 employees were added.
The headcount growth was a primary driver of total expenses, which were $5.6 billion, up 32%, in the quarter.
The company also said it had “around 14,000 employees and contractors working across community operations, online operations and integrity efforts.”
‘A personal responsibility’
Companies like Facebook often get in trouble because they are motivated by a "carrot" that drives certain behaviors. The social media giant invests in a great amount of resources to create a system that collects data. It makes it available to advertisers who use the platform to target specific audiences.
Since then, users of Facebook and other social media platforms have become more aware of how extensively their personal information is stored, bought and sold.
So, let’s say "Bob’s Scuba Shop" wants to advertise on Facebook. Facebook offers the business an opportunity to target those users it knows have an interest in scuba diving.
It can also be argued that it’s a way businesses can serve customers better, Farral said.
That doesn’t absolve Facebook from an important responsibility. That is, to protect consumers, he said.
“We have a lot of challenges on the defensive side to try to prevent bad stuff from happening,” Farral said. “Companies, even government, that store sensitive information, they have a tremendous responsibility to try to keep it protected and keeping up with whatever the latest, best practices are to keep that information safe.”
