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Facebook (FB) Stock Climbed Again Thursday: Time to Buy?

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Shares of Facebook (FB - Free Report) climbed over 2.5% on Thursday on the back of a massive new price target as well as some important news regarding its live video push. So let’s take a look at the most recent news surrounding the social media giant and quickly dive into some of Facebook’s other fundamentals to see if investors might want to buy FB stock.

Upgrade

BTIG analyst Richard Greenfield raised his Facebook price target from $175 to $275, which marked a roughly 43% upside from Tuesday’s closing price of $192.73 per share. The BTIG analyst is now one of two on Wall Street with a $275 FB price target, the highest listed on FactSet.

The new upbeat price target stems largely from Greenfield’s belief in the strength of Facebook’s photo and video-sharing app Instagram, which now boasts over 1 billion monthly active users, up from 800 million in September 2017.

Instagram currently crushes Twitter’s (TWTR - Free Report) 336 million MAUs. Meanwhile, its 500 million DAUs destroys Snapchat’s (SNAP - Free Report) 191 million. Instagram also—in a move that will see it compete more directly against YouTube—debuted its new IGTV on June 20. The new app/feature will allow users to upload hour-long video content, up from its previous one-minute limit.

“Facebook, since its earliest days as a public company, has talked about the goal of ads becoming content, which has actually happened on Instagram—everyone loves the ads, allowing for greater ad load and higher CPMs,” the analysts wrote in a note to clients. “The ads are so good, in fact, that Instagram is quickly becoming the most powerful and valuable mall in the world where you not only browse, but can buy anything you see.”

Furthermore, Greenfield was upbeat about Facebook’s flagship social media platform and noted that users "simply could not care less" about the nearly non-stop flurry of negative news surrounding the company this year. “We continue to view Facebook as a must-own stock to maintain exposure to growth of mobile time spent,” Greenfield wrote.

Live Video

News also broke on Thursday that Facebook landed the live broadcast rights for the Premier League—the England based soccer league—in Thailand, Vietnam, Cambodia, and Laos, which is reportedly set to run from 2019 to 2022. Facebook bought the rights to its first Premier League matches in the soccer-obsessed region for roughly £200 million, according to The Times of London.

The social media giant’s bid topped BeIn Sports and Fox Sports Asia (FOXA - Free Report) to stream each season’s 380-game schedule. Facebook’s deal to stream one of the world’s most popular soccer leagues helps demonstrate its live sports push, which has previously featured MLS and La Liga games. The move also comes after Amazon (AMZN - Free Report) announced a groundbreaking deal for the exclusive rights to broadcast a small but important set of Premier League matches in the UK.

Fundamentals

Deals like Facebook’s new Premier League streaming coverage are hugely important in an entertainment age being shaped by the likes of Netflix (NFLX - Free Report) and Hulu. Live sports and live video will help the company further monetize and add to its 2.20 billion monthly active users.

Facebook closed the first quarter with 1.45 billion DAUs, up 13% from the year-ago period, with the platform’s MAUs also up 13%—and these figures don’t include Instagram or WhatsApp.

Facebook’s impressive user base across multiple platforms has helped it turn into a money-making powerhouse that dominates the advertising business along with Google (GOOGL - Free Report) . Last quarter, Facebook reported revenues of $11.97 billion, with ad sales accounting for roughly 99% of total Q1 revenue. The company is reportedly set to grab 19.6% of all U.S. digital ad dollars in 2018, according to eMarketer—with Instagram projected to pull in 5%.

Price Movement & Valuation

Before Thursday’s jump, shares of Facebook had climbed roughly 32% over the last year. Investors should also note that Facebook stock is currently trading at 22.7X forward 12-month Zacks Consensus EPS estimates, which marks a substantial discount compared to its industry’s 30.5X average.

 

Furthermore, over the last year, Facebook stock has traded as high as 31.5X and as low as 19.9X, with a one-year median of 27.2X. Investors will also see that Facebook is currently trading close to its five-year low, and therefore it is hardly a stretch to say that FB stock appears rather inexpensive at the moment.

Outlook

Facebook, which announced that it will release its second quarter financial results on July 25, is projected to see its Q2 revenues climb by 43.7% to touch $13.39 billion, based on our current Zacks Consensus Estimate. Looking ahead to the full-year, Facebook revenues are expected to climb by 40.5% to touch $57.12 billion.

Moving onto the other end of the income statement, Facebook’s adjusted quarterly earnings are projected to pop by 31.1% to reach $1.73 per share, while its full-year EPS figure is expected to expand by 24.7%.

Facebook is currently a Zacks Rank #2 (Buy) that sports an “A” grade for Growth in our Style Scores system. FB looks like it might be worth considering at the moment based on its stellar valuation picture, growth outlook, and massive stock price upside on the back of continued online advertising strength.

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