FB Stock Could Rebound After Chatter over Andreessen’s Sale
Social media giant Facebook, Inc. (NASDAQ:FB) has made a great comeback since its initial public offering (IPO). FB stock is among the handful of stocks that have had a great year, unlike the rest of the market. Already up 32.5% year-to-date, Facebook stock has been far outpacing the S&P 500 index, making new highs. Here’s why I believe the slump on Monday morning, following Marc Andreessen’s sell-off of 75% of his stake, creates a great investment opportunity.
Here’s What Mr. Market Is Missing on FB Stock
To begin with, the sell-off is completely unwarranted. Before seeing his relationship to Facebook, investors need to recognize who Marc Andreessen truly is—a venture capitalist! Clearly, Mr. Market has blown the news out of proportions, because it makes perfect sense for a venture capitalist to cash out his investment when he finds that his pay-off targets have been met.
Besides, Andreessen is not an executive in the company; he’s a board member who doesn’t actively take part in running the company. I wouldn’t be surprised if the market soon hears that Andreessen liquidated his position to fund another startup in order to make more bucks.
Secondly, the market is too focused on trivial issues to see the real value this company holds. Facebook is among the few U.S. corporations that had a great earnings year despite the economy hitting a rough patch. Often cited as one of the best-managed companies, Facebook has been fast growing its stronghold, not just over the social media space, but the Internet as a whole.
Facebook management has been actively taking steps to strengthen its position in the market and, in the process, effectively driving out competition. Facebook has already become the undisputed leader in the social media space. With Instagram and WhatsApp under its belt, the company remains unbeatable.
Chart courtesy of www.StockCharts.com
Each of Facebook’s latest moves is expected to unlock great value in terms of monetization. According to the latest stats, Facebook’s display ad revenue is already outpacing that of Alphabet’s search behemoth, Google. (Source: “Can Facebook Outsearch Google?” Bloomberg, November 16, 2015.) At the pace Facebook is monetizing its new features, it wouldn’t surprise me if this company is soon able to overtake Google in total search-related revenue.
Additionally, Facebook has launched its massive scale initiative in the video ad industry earlier this year and has already taken more than 1.5 million small- and medium-sized businesses on the video ad platform. The feature is already making solid bucks in its nascent phase. Imagine what it’ll be returning when it catches up on growth. The e-commerce “Buy Button” and the tailored “Search FYI” feature remain two other prospective sources of ad revenue.
Beyond monetization, the company is venturing into promising technology products with its biggest release expected next year—Facebook’s virtual reality immersive gaming headgear, “Oculus Rift,” which already has all the tech junkies and hardcore gamers going gaga.
The Bottom Line on FB Stock
Monday’s selling frenzy reminds me of the legendary Warren Buffett’s words: “Be fearful when others are greedy and greedy when others are fearful.”
As the company continues to make hefty profits and maintains its growth with well-calculated leaps in the social media and technology industry, investors wouldn’t be wrong to expect a solid rebound in Facebook stock.
Brace yourselves: FB stock will soon be firing on all cylinders.