The Strategist

Facebook or Netflix: Investor's choice

12/24/2018 - 13:50

The famous FAANG stocks are gradually losing their former strength, while the first and third members of the group are taking the hardest blows.

Facebook and Netflix have fallen by 34% and 36%, respectively, since they hit record highs this summer. Nevertheless, both giants of the high-tech sector still occupy a leading position in their respective industries.

Facebook is still the leading social network in the world, attracting 2.27 billion active monthly users, and the number of Netflix subscribers has already reached 137.1 million in total. But despite this, the market seems to think that both companies are worth a third less than 6 months ago. Would it be a good decision to buy them now?


It's amazing how much can change in just a year or two. In 2016, Facebook's revenue increased by 54%, surpassing Netflix (the company's revenue increased by 30% over the same period). Last year, the situation repeated itself, when Facebook's revenue grew by 47%, and Netflix - by 32%. But the situation has changed radically since then.

Over the last quarter, Facebook's revenue increased by 33%, showing the weakest growth in the last six years. During the same three months, Netflix recorded an increase of 34% and for the first time surpassed the famous social network. Although analysts predict a slowdown in 2019 for both companies, Netflix revenues should grow by 26% against 24% of Facebook.


Recently, a lot of things have been going on for Facebook, but the scenario was not the most favorable. Problems with leakage of confidential data indicate that the company’s management is not really coping with great damage to the social network reputation. In the third quarter, the number of active users in the United States and Canada froze at the same level, while there is already a decline in Europe. And while the bulls are likely to continue to claim that Facebook will still benefit from the other two popular platforms, Instagram and WhatsApp, they will never contribute to revenue growth like the leader of all social networks.

As history shows, managers of Netflix have always skillfully dealt with outside criticism, be it a discussion of corporate culture or the problem of service, with the launch of a new season of the popular series.

On the other hand, Facebook scandals seem to play a major role in slowing growth, while Netflix is nearing completion of the most successful period in terms of increasing revenue since 2011.