FB Stock Prediction: How High Can Facebook Reach in 2017?

FB stock predictionsFB Stock Predictions Are a Dime a Dozen

Facebook Inc (NASDAQ:FB) is no longer the tiny startup looking to “connect the world.” It is a giant corporation with myriad concerns, interests, and investments. Recognizing that Facebook is powerful is the first step toward setting a reasonable FB stock price target. Otherwise, your FB stock predictions are going to fall way short of the company’s true performance.

We’re seeing this trend replicate across the stock market. Big companies are getting bigger, stronger, and more cash-rich while small companies are getting bought over or pushed out of the market.

According to recent academic research, more than 75% of U.S. industries saw an increase in the concentration of market power. (Grullon, Gustavo, Yelena Larkin, and Roni Michaely, “Are US Industries Becoming More Concentrated?” February 23, 2017.)

In other words, the stock market has become “winner-take-all.”

It wasn’t always so. There was a time when antitrust agencies would check the power of major corporations. They wouldn’t sit back and watch giant companies bully smaller ones into submission. Market power was not allowed to run wild like it does today.

You may be wondering what this has to do with the Facebook stock price and the Facebook stock prediction. Simple: Facebook is the 800-pound shark of social media, and it can use that market power to boost its stock price.

Think about it.

  • What happened when Instagram posed a threat to Facebook? Facebook bought it.
  • What happened when Whatsapp became a thorn in Facebook’s side? Facebook bought it.

This isn’t coincidence. Facebook deliberately shuts out competition. (And who can blame it? Any smart business owner would do the same thing.)

No wonder the Facebook stock price tripled since its initial public offering (IPO).

FB

Chart courtesy of StockCharts.com

There was a minor dip post-IPO, but only because investors didn’t grasp how Facebook was using its market power.

They couldn’t fathom why on earth Facebook paid $1.0 billion for Instagram! But it soon became clear what Facebook was doing.

It was seizing monopoly power over the entire social media industry and, according to billionaire investor Peter Thiel, that is the best advantage any company can have.

From then on, investors changed their FB stock prediction and gave Facebook the benefit of the doubt. Even the $19.0-billion acquisition of Whatsapp failed to put a dent in FB stock price.

Can Snapchat Diminish the Facebook Stock Forecast?

This increased market power could lead to another year of triple-digit gains for Facebook shares. We would not be surprised if the FB stock price continued its astounding growth pattern through the remainder of 2017. The stock could easily reach $200.00 to $250.00 before the year is out.

However, there are some things to consider.

For instance, what happens when a startup turns Facebook down? What happens when the little fish thinks it can take down the 800-pound shark?

Snap Inc (NYSE:SNAP) is the perfect example. Everyone in Silicon Valley thinks its main app, “Snapchat,” is a threat to Facebook.

As you can expect, a $3.0-billion purchase offer arrived on Snap’s doorstep. Remember that Facebook is trying to keep a tight grip on the market, so naturally it wants to scoop up this rising social media app. But Snap refused the offer.

It wanted to be Facebook, not become a cog in the larger machine.

Snap eventually held an IPO in early March 2017. It premiered on the New York Stock Exchange (NYSE) under the ticker symbol “SNAP” and swung dramatically in price. In the first few days of publicly trading, SNAP stock jumped more than 50%. Then it crashed.

Investors are hot-and-cold on the stock. One moment, they are convinced that Snapchat can poach FB ad revenue, and the next, they remember that Facebook owns four of the biggest social media platforms on the planet. At that point, the fear kicks in. Investors are constantly flip-flopping when it comes to Snapchat vs Facebook.

Facebook vs. Snapchat

Social Media App

User Base

Facebook

1.86 Billion

Whatsapp

1.2 Billion

Messenger

1.0 Billion

Instagram

600 Million

Snapchat

300 Million

As you can see, Snapchat has only half the user base of Facebook’s smallest social media property. So forget the hype. There is no evidence that Snapchat is eating into Facebook’s market share, nor is there any reason to worry about FB ad revenue.

In all likelihood, we’re going to see the Facebook stock price reach $200.00 very soon.

Is “Fake News” a Problem for FB Stock?

For those who may not know, Facebook found itself in the middle of a controversy last year. Here’s what happened.

Articles (that were clearly untrue) went viral on Facebook, spreading information that would never have made it past a reasonable news editor. And, since people don’t read newspapers any more, but rely on social media to filter their news, these articles were accepted as fact by a large number of people.

That much is fact. Now we venture into the murky territory of speculation.

Some people claim that Facebook’s “fake news” epidemic swung the 2016 presidential election. This, in turn, raised questions about Facebook’s role in publishing “fake news,” challenging many people’s FB stock prediction.

CEO Mark Zuckerberg’s initial reaction was to shrug and move one. He claimed that it had no responsibility to control what was shared on its platform because, hey, it’s just a platform. Except that, no, it isn’t.

Here’s a snippet of what he wrote just days after the election: “Of all the content on Facebook, more than 99% of what people see is authentic. Only a very small amount is fake news and hoaxes.” (Source: “Mark Zuckerberg Facebook post,” Facebook, November 12, 2016.)

But after several months of talking to various publishers and listening to the public outcry, Zuckerberg started singing a different tune. He became aware that people were losing trust with Facebook, and that could jeopardize the company’s business.

This isn’t just theory or a random Facebook stock prediction; FB stock was tumbling all through November 2016. It was a nasty fall for the Prince of Silicon Valley, the CEO who could do no wrong. For more than four years Zuckerberg had led Facebook stock price higher, but now he was facing an existential threat to his company.

FB_fake-news

Chart courtesy of StockCharts.com

So Zuckerberg finally admitted that Facebook is (in some ways) a media company. He agreed to develop tools for identifying “fake news” and to work with fact-checking organizations like Snopes and Politifact. While this still leaves a lot of room for error, Zuckerberg seems to have stopped the bleeding for now.

FB stock recovered in the new year, even reaching record highs in February and March. But trust is a fickle thing. Zuckerberg needs to stay atop his PR game if Facebook is to get through 2017 smelling like roses.

Think about it: Facebook is a social media company. So what happens if it loses its social capital? Nothing good, I can assure you. The company cannot afford more backlash from the public. Even if they don’t solve the “fake news” problem immediately, users need to think that Facebook cares about their experience.

Perception matters a lot in cases like these.

When Will FB Stock Split?

Aside from the “fake news” stuff, Facebook stock is in good shape. In fact, the upcoming stock split could kick-start a bullish run on FB stock.

For those who may not know, Facebook’s board of directors approved a 3-for-1 split in April 2014. The FB stock split will usher in a new class of stock (C Class), while also making Facebook stock more affordable.

We would be remiss in ignoring this split. Facebook hasn’t altered its stock since before it went public.

Facebook Stock Split History

Stock Split Date

Split Ratio

July 2006

4-for-1

October 2007

4-for-1

October 2010

5-for-1

More to the point, these new shares don’t carry voting rights. They exist to strengthen Mark Zuckerberg’s control over the company, albeit at the expense of average shareholders.

Zuckerberg intends to give away most of his wealth during his lifetime. He also intends to run for public office some day. But he still wants control over the company he built in a Harvard dorm room. Therefore, he is diluting the voting rights of everyone except himself.

It is a dictatorial move, to be sure, but not one that will impede the growth of the Facebook stock price. Zuckerberg has proven himself as a CEO. He tripled the value of FB stock in a few short years, and is ready to continue that legacy. I don’t mind if he sits in the driver’s seat.

Should You Invest in FB Stock in 2017?

Obviously that decision is up to you. But if you’re wondering about the Facebook stock prediction, if Facebook stock can really deliver more gains to shareholders, please stop right now. Of course it can!

Online advertising spending is expected to grow rapidly between now and 2020. Facebook owns four of the biggest pipelines for those ads, meaning it commands the entire market. It has extraordinary influence over prices and terms.

As for rivals like Snapchat, don’t make me laugh.

Companies like Facebook use both the carrot and the stick. When the carrot fails, the stick comes into play. It is going to bully and coerce Snap into submission. Part of this strategy involves copying Snapchat’s most successful products, which it has been doing for years.

That may annoy Snapchat, but who cares? Business is about winning, and investing is about picking winners. The numbers show that Facebook stock is a proven winner, so I’ll remain bullish on it until Snapchat can prove itself by turning a profit.