Today, let’s explore how even in a dizzying post-election climate where “fake news” seems to be an angst-filled buzz word that keeps coming up for air, social media titan Facebook Inc (NASDAQ:FB) is still the stock to buy.
Since a feisty, collegiate Mark Zuckerberg first launched Facebook in 2004, the idea has burgeoned forth to become a multi-billion dollar platform. It was an innovative concept that evolved into the go-to network for social interaction.
However, credibility issues arose last year in the mix of the volatile presidential election, where fake election news stories were garnering millions of shares; more so than those based in fact.
Meanwhile, the titan has revealed flaws in its advertising metric system that flared not once, not twice, but three times last year- a recurring faux pas that had investors wondering whether advertisers still trusted to spend their dollars on buying ads on Facebook.
Even after a quarter that handily outclassed Street expectations, shares saw an initial 5% dip after the warning signal flared indicating the company anticipated ad load to no longer be a key driver of revenue growth, alerting investors that ad revenue growth would “meaningfully” decelerate. Rather, the focus would turn to spending “aggressively.”
Nonetheless, consider the larger context at hand. Facebook is not a small company by any means, and a potential blunder for Zuckerberg’s brainchild in the bigger picture is just a stumble.
Consider the fact that in just the past two quarters, this is a giant whose advertising business has increased by close to $1.6 billion. For reference? Alphabet Inc (NASDAQ:GOOGL) grew its ad business by $1.4 billion. Therefore, even among fellow big internet players, Facebook seems to be handling itself just fine.
Zuckerberg did not reach billionaire status by playing in the minor leagues. Part of the stock’s compelling value lies in its useful assets, like Instagram, Facebook Messenger, WhatsApp, and Oculus VR. Therefore, the titan can reap the profitable revenue benefits from each of these acquired companies, which is a viable financial strategy game plan moving forward.
Instagram particularly is a purchase acting in Facebook’s favor. In April of 2012, Facebook shrewdly bought the photo filter app for $1 billion. Since then, Zuckerberg has wisely taken advantage of its not-so-secret weapon, taking on rival Snapchat’s Stories and daring to make the feature better via the Instagram platform. Since Stories first sprang into tech-existence on Instagram five months ago, 150 million people are now actively using the feature. Check point: Zuckerberg.
Next followed the titan’s first footsteps into entering the world of virtual reality (VR): Zuckerberg shelled out approximately $3 billion to buy Oculus in 2014. As social virtual reality continues to emerge as a new focus for society, Facebook’s endeavors to make the presently isolated experience cheaper and more social could prove to be highly valuable in the next few years.
Whereas Zuckerberg intends to monetize the VR space, the Facebook Messenger app has begun trying to experiment with ads in its interface, a way to incite interested business advertisers to jump on board the money machine. Additionally, the Messenger app has been revamped to now boast a camera feature offering filters and 3D masks- yet another way to appeal to its 1 billion user base over rival Snapchat.
Looking back, 2014 was a big year for toiling the revenue soil of days to come, with one of the largest technology acquisitions in the M&A game: Facebook added WhatsApp to its tech army of viable assets. When the mobile app, Zuckerberg’s biggest buy, is a texting service without advertisements, what led the business mogul to invest $22 billion, outbidding Alphabet’s offer almost twice over?
In the strive to attain an accelerated amount of daily active users, WhatsApp last year hit over 1 billion monthly active users who are sending 30 plus billion messages daily across the globe. Facebook is dominating the messaging-verse, and the more personalized and engaging the giant renders itself, the better the prospects for the stock.
Clearly, Zuckerberg knows how to roll the dice, and intends to extend his titan’s reach in as many useful directions as he can. Facebook has been setting itself up to win the long game- and with a bevy of relevant acquisitions bound to appreciate as time goes by, Zuckerberg’s stock is the one to beat.
Out of the 39 analysts polled by TipRanks (in the last 3 months), 36 rate Facebook stock a Buy and 3 maintain a Hold. With a potential upside of 18%, the stock’s consensus target price stands at $155.19.
Disclaimer: The author has no positions in the stock mentioned. This article is intended for informational and entertainment use only, and should not be construed as professional investment advice.