What’s Next for FB Stock
Facebook Inc (NASDAQ:FB) is a shark—a relentless predator that gobbles up little minnows so it can feed its share price. That predator mentality helped FB stock deliver triple-digit gains to shareholders in just a handful of years.
Facebook is going to keep raking in the cash and buying smaller companies. They deliberately seek out the hottest startups in an emerging field and acquire them.
Remember WhatsApp? Remember Oculus VR? Both of these companies were early players in their respective markets. WhatsApp had 500 million users and Oculus was the first company to perfect virtual reality (VR). Facebook was flush with cash, so it could afford the hefty price tag for these companies.
Now virtual reality devices are heralded as “the next iPhones.” They are supposed to revolutionize everything from entertainment to education. Goldman Sachs estimates that virtual reality will be worth $80.0 billion by 2025. (Source: “The Real Deal With Virtual and Augmented Reality,” Goldman Sachs, February 2016.)
Facebook was the first one to stake a claim on this market following its acquisition of Oculus VR. It is making VR headgear, the “Oculus Rift,” at multiple price points and through multiple channels. If any company is going to take home a majority of that $80.0-billion market, it’s going to be Facebook.
And as for messaging apps like “WhatsApp” and “Messenger,” many analysts think they are the next big thing. Facebook unveiled a whole set of tools for developers at a recent conference. These tools will help developers build programs so that advertisers can reach their consumers on messaging platforms. (Source: “Messenger Platform at F8,” Facebook Inc, April 12, 2016.)
You might think that Facebook is straining its cash flow with all these acquisitions. After all, it’s just a social media company, right? How could they generate enough profit to compete with the Alphabet Incs and Apple Inc.s of the world?
Well, I have news for you: Facebook is so much more than just a social media company. It is a bona fide giant, a titan of commerce. In the new era, where technology firms rule supreme, you better appreciate greatness when you see it.
And Facebook is simply great. This company increased its net income by nearly 7,000% in just four years, from $53.0 million in 2012 to $3.7 billion in 2015. At the end of last year, Facebook was sitting on $18.4 billion in cash.
What I see in those numbers is a firm that masterfully pushes its capital into high-growth sectors. So even though Facebook has become this giant blue-chip company, it’s still capable of delivering triple-digit gains like when it was a startup.
I see a company that held onto its predator spirit. Shareholders should be incredibly happy that Facebook is still a shark, because it means FB stock could keep skyrocketing.