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Facebook Inc (FB) Turning Heads With Hashtags

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Facebook Inc (NASDAQ:FB) has finally released its hashtag service for users. I played around with it for a couple of minutes. Hashtags are actually really interesting as they allow you to see what other people on Facebook Inc (NASDAQ:FB) are doing without having to be in their social network. This is the first time Facebook Inc (NASDAQ:FB) has decided against its closed social network of just friends.

Facebook Inc (NASDAQ:FB)

Will this help to turn around the company?

Facebook Inc (NASDAQ:FB) is still offering privacy settings on the hashtag, but in the company’s public statement, the company believes that it will increase the social discussion on major events that are going on around people. The company quoted statistics of 100 million people using Facebook Inc (NASDAQ:FB) during prime time television. The statistic may imply that people will want to gain greater perspective on trending thoughts. This will hopefully increase the social aspect of the social network.

This could lead to better targeted advertising as most users do not change their profile information. In the future, advertisers will be able to place banner ads on the website based on the hashtags that the users use, and this will lead to more fine-tuned advertising. User engagement statistics will go up leading to higher conversion rates for advertisers, which will directly translate into higher average revenue per user.

How to position

The stock didn’t really respond much to the news as it pulled back by around 0.17% in the session. The moderate decline in the valuation of the stock implies that investors aren’t having very high expectations from this recent development. The Standard & Poor’s 500 rallied by around 1.48% in the session.

The company trades at a bit of a hefty valuation with a 10.5 price to sales ratio, and a 67.9 price to cash flow ratio. The company has to make up for this high valuation with exponential growth. Hashtags are a welcomed addition, but the company needs to do even more to increase the average revenue per user.

The stock is likely to trade in the low $20’s until the management team executes upon a series of practical growth strategies like hash-tagging. For now, investors should hold their breath and see what else comes from the Facebook Inc (NASDAQ:FB) research labs.

The company will remain the most dominant social network for many years ahead, so long-term investors should look to accumulate the stock over a course of many years and months, rather than trying to day-trade the stock, as it is way too volatile.

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