Shares of Menlo Park, California-based Facebook Inc. (NASDAQ:FB) are on a roll in 2017, gaining more than 21% YTD after a lackluster 2016. FB stock is trading near its all-time high of $139.68. FB stock has been driven by multiple factors. At large, the strong bullish rally has been on account of strong revenue growth and higher profits which Facebook registered in 2016. Facebook Inc had reported 54% growth in revenue for 2016. However, in its Q4 earnings call, the management warned investors that the social media giant could face strong headwinds on the growth front as "ad load" had saturated. But if you go by some latest research, the Menlo Park company is set to increase its grip on the digital ad market. With FB stock near its all-time highs, the question is whether it will continue to move higher or not? Here is another reason why FB stock is a buy, even near its all-time high.
Facebook Steals March Over Google In Display Ads
In one of our previous coverages, we had discussed how Facebook's growth is coming at the expense of other social media platforms. But now, a latest study shows that the social media company is set to gain at the expense of Alphabet's (NASDAQ:GOOGL) Google as well. The latest eMarketer forecast expects US digital ad spending to increase by 15.9% to reach $83B in 2017. While Google is expected to be the leader in the search market, Facebook is expected to be the no. 1 player in terms of display ads. According to eMarketer, "The social network’s US display business will jump 32.1% to $16.33 billion, capturing 39.1% of the US display market, taking share away from Google, Yahoo, and Twitter." The research firm forecasts Google's display ad revenue to go up to $5.24B, but expects its display ad market share to drop to 12.5%. If one were to go by the eMarketer forecast, then the headwinds on the growth front seem to be taken care of. The study also suggests that Instagram could be a key revenue growth driver for Facebook Inc, which is set to account for 20% of US mobile revenue for the social media company, up from 15% last year.
Facebook's Video Push: A Step In The Right Direction.
Mark Zuckerberg, CEO of Facebook considers "video as a mega trend on the same order as mobile". And Facebook has announced billions of dollars of investment in video content. All this is set to pay off, given that it seems to be the key to increasing the time spent by a user on Facebook and drawing more advertisers. To quote eMarketer forecasting analyst Monica Peart on this: "Facebook’s users are increasingly captivated by videos on the platform—not just on Facebook, but on Instagram as well. Video, both live and recorded, is a key driver of growing user engagement and advertiser enthusiasm." To add to that, another eMarketer post reports that video spend is growing at a faster clip than search, which is expected to increase in the range of 2% for the next two years. Only mobile ad spending is growing faster than video. To gain from this, Facebook also has added support for ads to appear in the middle of videos, and it's trying to go the extra mile in the video space with its dedicated video app for TVs. Investors should be encouraged by Facebook's video push in a big way as this could be the next revenue growth driver for the Menlo Park company.
Whatsapp Can Get Monetized Faster Than Expected.
Facebook's multi-billion dollar acquisition Whatsapp, which is yet to be monetized, is reported to be working on a business model to generate revenues by charging businesses that wish to contact customers. This model also involves the risk of spamming. As a post on Reuters reports that "WhatsApp is also surveying users about the extent to which they talk to businesses on WhatsApp, and whether they have ever received spam". The Reuter post also states that last month, WhatsApp entered into a deal with Y Combinator, which is a renowned incubation center, that would allow various companies to become part of their trial. The trial is in the initial stages and some of the participants are extremely optimistic about its success. A use case forwarded by one of the participant startups Cowlar Inc, which makes collars for dairy cows for various monitoring activities, is expected to use Whatsapp "to send alerts from collars to the farmers if there is some unforeseen problem." Ilyas, co-founder, Cowlar Inc thinks that this "represents a huge opportunity, because in all the big dairy markets – India, Brazil, and Pakistan – a lot of farmers have access to WhatsApp." This latest development although in the initial stages should give one more reason to buy Facebook stock.
Facebook Stock Remains A Buy Even Near its All Time High Price.
Facebook stock closed at $139.32 in the last trading session, near its all-time high stock price. Facebook stock could top $175 on mobile and Instagram growth as we had highlighted in our previous coverage. This is much higher than its present stock price and the above reasons discussed, reaffirms the view that FB stock is headed much higher. The above points discussed should give investors the confidence that Facebook is well poised to overcome the headwinds stated in its Q4 earnings call. Investors now have another reason to buy FB stock. FB stock remains a good long-term buy.
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Facebook Inc (FB) CEO Sells $52,497,317.12 in Stock
Facebook Inc (NASDAQ:FB) CEO Mark Zuckerberg sold 380,636 shares of the stock in a transaction that occurred on Thursday, March 9th. The stock was sold at an average price of $137.92, for a total value of $52,497,317.12. The sale was disclosed in a legal filing with the SEC, which is available at this link.
Mark Zuckerberg also recently made the following trade(s):
- On Monday, February 27th, Mark Zuckerberg sold 192,874 shares of Facebook stock. The stock was sold at an average price of $136.10, for a total value of $26,250,151.40.
- On Tuesday, February 28th, Mark Zuckerberg sold 386,116 shares of Facebook stock. The stock was sold at an average price of $135.97, for a total value of $52,500,192.52.
- On Wednesday, December 21st, Mark Zuckerberg sold 798,076 shares of Facebook stock. The stock was sold at an average price of $119.04, for a total value of $95,002,967.04.
- On Monday, December 12th, Mark Zuckerberg sold 799,481 shares of Facebook stock. The stock was sold at an average price of $118.83, for a total value of $95,002,327.23.
Shares of Facebook Inc (NASDAQ:FB) opened at 139.32 on Wednesday. Facebook Inc has a 12-month low of $106.31 and a 12-month high of $139.68. The firm has a market cap of $402.63 billion, a PE ratio of 39.89 and a beta of 0.68. The company has a 50 day moving average price of $134.56 and a 200-day moving average price of $127.01.
Facebook (NASDAQ:FB) last issued its earnings results on Wednesday, February 1st. The social networking company reported $1.41 earnings per share (EPS) for the quarter, topping the Zacks’ consensus estimate of $1.31 by $0.10. Facebook had a net margin of 34.33% and a return on equity of 19.05%. The firm had revenue of $8.81 billion for the quarter, compared to analysts’ expectations of $8.47 billion. During the same quarter last year, the company posted $0.79 earnings per share. Facebook’s revenue was up 50.8% on a year-over-year basis. Analysts expect that Facebook Inc will post $5.42 EPS for the current year.