Why Facebook Is Citron's Top S&P 500 Stock For Next Year

This year has been a tough year for popular stocks, but Facebook, Inc. FB has been the hardest-hit of the popular FANG group, dropping 28.3 percent year-to-date. However, not only is one popular Wall Street short seller calling for Facebook to rebound in 2019, he said Facebook is his top stock pick in the entire S&P 500 next year.

Facebook has proven his previous long-term bearish thesis to be completely wrong, according to Citron Research’s Andrew Left.

“In the past 30 months FB has more than doubled its quarterly revenue and concerns of engagement have shifted to concerns of addiction, yet the stock is back down in $120 range,” Left wrote in a new report. He thinks Facebook will get back to the $160 per share

Despite a parade of negative public relations issues and media attacks this year, Left said Facebook’s user massive user base of 2.2 billion people has remained relatively stable.

3 Catalysts

Left said there are three important elements to the bullish thesis for Facebook in 2019:

1. Facebook offers value. Left said Facebook is trading at its lowest earnings multiple in history despite growing faster than 95 percent of S&P 500 components and generating margins that are higher than 90 percent of the S&P.
2. Facebook is not evil. Left said Facebook trades at a discount to tobacco company Altria Group, Inc. MO and controversial multi-level marketing company Herbalife Nutrition Ltd. HLF, and Left said Facebook’s motives aren’t nearly as nefarious as either.
3. Instagram is a cash cow. Left said both Instagram and Facebook are platforms with no real competition, and Facebook is now focusing on how it can better monetize Instagram via marketing, including the creation of a standalone Instagram shopping app.

“As investors have become overly concerned about the short-term noise of privacy and propaganda, they have forgotten to look at the earnings power and potential of the most advanced advertising tool with global reach in messaging, networking, and the future of shopping,” Left wrote.

While Left remains a Twitter, Inc. TWTR bear, he said Facebook’s resilience has forced Citron to take a complete 180-degree turn from its previous bearish outlook.

Facebook's stock traded higher by 3.7 percent to $128.66 per share at time of publication.

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