Facebook Stock Doesn’t Need Fixing

Mark Zuckerberg says he wants to “fix” Facebook Inc (Nasdaq: FB) in 2018. Zuckerberg’s New Year’s resolution sounds simple enough, but investors will be watching closely to see if he sticks to his pledge and how it may impact Facebook’s business.

In a new post on Facebook, Zuckerberg says he considers it a personal challenge to police Facebook’s policies and prevent users from exploiting its vulnerabilities.

“We won’t prevent all mistakes or abuse, but we currently make too many errors enforcing our policies and preventing misuse of our tools,” Zuckerberg says. Zuckerberg aims to reduce abusive and hateful content, prevent manipulation by nation states and improve overall user experience.

While Facebook users may be excited about the potential improvements to the platform, Facebook investors are a bit uneasy about Zuckerberg tinkering with a winning recipe. Facebook stock is up 56 percent in the past year, and the company has reported revenue growth of between 45 and 51 percent in each of the past four quarters.

Despite the uncertainty surrounding Zuckerberg’s resolution, Citi analyst Mark May says Facebook is among his top stock picks for 2018. May says Facebook’s relatively modest valuation, impressive ad revenue growth, tax cut tailwinds and premium video opportunity will continue to drive the stock higher.

Facebook’s 2018 may be defined by how well it executes its streaming video strategy. In September, the Wall Street Journal reported Facebook was pumping up to $1 billion into original video content in the next year, and Jefferies estimates Facebook Watch could generate up to $12 billion in revenue by 2022.

Still, May says investors should watch the impact of new privacy rules, rising costs and potential stumbles in Facebook’s video roll-out.

Facebook stock “arguably has the most attractive valuation in our universe,” he says, but adds he has “concern about how investors could react to margin pressure from heightened expense growth and from the mix shift to video advertising.”

May also says expectations for the company are sky-high following numerous upward revisions to Wall Street estimates. Facebook has…

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