Facebook , the world's most powerful social media platform, is a more attractive investment today than ever before. Despite FB trading at all-time highs, the stock is sitting at reasonable valuation multiples, trading at a 23x P/E below its 5-year median. Analyst expectations have been soaring following its tremendous Q1 report, which blew estimates out of the water, its most significant top and bottom-line beat ever (at least as far back as 2014, where my ZRS Earnings Surprise data ends). Due to the magnitude of bullish EPS revisions, FB has been propelled to a Zacks Rank #1 (Strong Buy)
The company is on fire, but its share price remains somewhat hampered by regulatory concern regarding targeted advertising and section 230 (which provides immunity to social media platforms from 3rd party content). Some apprehensive investors aren't considering Facebook's scale and capital to navigate any regulatory changes better than the smaller players. I have no doubt that it already has a team ready to attack any regulatory changes and likely has contingency plans for each potential regulatory shift. If new regulations were to come over the social media space, it would only further FB's already monopolistic positioning.
The Business
Facebook operates the most powerful social media conglomerate on earth, running the largest and fastest-growing social media hubs, including its namesake & Instagram and internationally leading messaging platforms like WhatsApp & FB Messenger.
2.72 daily active people (DAP) and 3.45 monthly active people (MAP) utilizing one of its globally dominating digital platforms. This means that 73% of the internet using economy leverages one of Facebook's portfolio of products monthly, and 58% do so daily. This is an unprecedented level of engagement that makes it the most influential enterprise on earth.
Facebook's level of power over the general population in this herd-driven global society is scary, but as an investor, it's an exciting place to be. The social media powerhouse has navigated the last decade of digital advancement almost perfectly. Facebook's $1 billion acquisition of Instagram in 2012 and its $16 billion purchase of WhatsApp in 2014 were the savviest investments that this company could have made over the past 10 years. These acquisitions solidified FB's control over the social media space.
Finances
According to people familiar with the matter, Instagram contributes $20 billion (20 times what FB paid for it) to Facebook's 2019 topline, making up more than 25% of total revenue, and it's still a prolific growth story. Facebook doesn't itemize each of its platforms' contributions in its income statements, making it challenging to decipher individual growth figures unless they explicitly say it.
Nevertheless, FB has been experiencing accelerating sales and profitability over the past 4 quarters as engagement surges amid the pandemic. The rapid digitalization of society combined with the recent resurgence in business spending has sent Facebook's top and bottom lines to new highs. The pandemic has conditioned society to be more engaged in the company's 'family' of products than ever before.
Advertisers are willing to pay up to get on FB's platforms, and for a good reason. Its target advertising based on search history is highly effective, and businesses can't afford not to use Facebook as a marketing conduit. Revenue per user accelerates every quarter (on a year-over-year basis) and increased by 29% in its Q1 compared to the same quarter last year. Swelling revenue per user combined with the over 15% increase in daily active users in the past year continues to push this digital powerhouse to new levels of incredible profitability.
Facebook's balance sheet is a fortress with $64.22 billion in cash & equivalents, more than double its total liabilities. This enormous cash pile pooled with its $10s billion in annual free-cash-flow (operating cash-flows post Cap-Ex) gives this enterprise a tremendous amount of financial flexibility for both organic investment and further acquisitions.
Final Thoughts
FB is one rally that may be worth chasing in the tech sector. The social media giant continues to prove itself as a secular growth machine that doesn't slow down no matter what the broader economic conditions throw at it. Analysts are exceptionally bullish on FB as it makes its way up into the trillion-dollar club, with a current market value of $956 billion and growing.
27 out of 30 analysts are calling FB a buy today, with no sell ratings. The shares are 9% below the average price target of $367 (this figure may include some outdated targets) and over 36% below the most bullish price target of $460. It may be time to start a position as FB gains momentum into the new normal.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
Bull Of The Day: Facebook (FB)
Facebook , the world's most powerful social media platform, is a more attractive investment today than ever before. Despite FB trading at all-time highs, the stock is sitting at reasonable valuation multiples, trading at a 23x P/E below its 5-year median. Analyst expectations have been soaring following its tremendous Q1 report, which blew estimates out of the water, its most significant top and bottom-line beat ever (at least as far back as 2014, where my ZRS Earnings Surprise data ends). Due to the magnitude of bullish EPS revisions, FB has been propelled to a Zacks Rank #1 (Strong Buy)
The company is on fire, but its share price remains somewhat hampered by regulatory concern regarding targeted advertising and section 230 (which provides immunity to social media platforms from 3rd party content). Some apprehensive investors aren't considering Facebook's scale and capital to navigate any regulatory changes better than the smaller players. I have no doubt that it already has a team ready to attack any regulatory changes and likely has contingency plans for each potential regulatory shift. If new regulations were to come over the social media space, it would only further FB's already monopolistic positioning.
The Business
Facebook operates the most powerful social media conglomerate on earth, running the largest and fastest-growing social media hubs, including its namesake & Instagram and internationally leading messaging platforms like WhatsApp & FB Messenger.
2.72 daily active people (DAP) and 3.45 monthly active people (MAP) utilizing one of its globally dominating digital platforms. This means that 73% of the internet using economy leverages one of Facebook's portfolio of products monthly, and 58% do so daily. This is an unprecedented level of engagement that makes it the most influential enterprise on earth.
Facebook's level of power over the general population in this herd-driven global society is scary, but as an investor, it's an exciting place to be. The social media powerhouse has navigated the last decade of digital advancement almost perfectly. Facebook's $1 billion acquisition of Instagram in 2012 and its $16 billion purchase of WhatsApp in 2014 were the savviest investments that this company could have made over the past 10 years. These acquisitions solidified FB's control over the social media space.
Finances
According to people familiar with the matter, Instagram contributes $20 billion (20 times what FB paid for it) to Facebook's 2019 topline, making up more than 25% of total revenue, and it's still a prolific growth story. Facebook doesn't itemize each of its platforms' contributions in its income statements, making it challenging to decipher individual growth figures unless they explicitly say it.
Nevertheless, FB has been experiencing accelerating sales and profitability over the past 4 quarters as engagement surges amid the pandemic. The rapid digitalization of society combined with the recent resurgence in business spending has sent Facebook's top and bottom lines to new highs. The pandemic has conditioned society to be more engaged in the company's 'family' of products than ever before.
Advertisers are willing to pay up to get on FB's platforms, and for a good reason. Its target advertising based on search history is highly effective, and businesses can't afford not to use Facebook as a marketing conduit. Revenue per user accelerates every quarter (on a year-over-year basis) and increased by 29% in its Q1 compared to the same quarter last year. Swelling revenue per user combined with the over 15% increase in daily active users in the past year continues to push this digital powerhouse to new levels of incredible profitability.
Facebook's balance sheet is a fortress with $64.22 billion in cash & equivalents, more than double its total liabilities. This enormous cash pile pooled with its $10s billion in annual free-cash-flow (operating cash-flows post Cap-Ex) gives this enterprise a tremendous amount of financial flexibility for both organic investment and further acquisitions.
Final Thoughts
FB is one rally that may be worth chasing in the tech sector. The social media giant continues to prove itself as a secular growth machine that doesn't slow down no matter what the broader economic conditions throw at it. Analysts are exceptionally bullish on FB as it makes its way up into the trillion-dollar club, with a current market value of $956 billion and growing.
27 out of 30 analysts are calling FB a buy today, with no sell ratings. The shares are 9% below the average price target of $367 (this figure may include some outdated targets) and over 36% below the most bullish price target of $460. It may be time to start a position as FB gains momentum into the new normal.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>