Is Facebook, Inc. a $250 Stock?
The rapid expansion of Facebook, Inc. (NASDAQ:FB), combined with the foresight of Mark Zuckerberg, makes me think that FB stock could be dramatically undervalued. Considering the full range of Facebook’s activities and the potential for revenue growth, it seems to me like FB stock should be closer to $200.00 or $250.00 per share.
Ironically, it’s the popularity of Facebook as a social media platform that makes it easy to underestimate. The Facebook we see is our “Timeline,” a free service where we can see what our friends and family are up to. Then there’s the “Messenger” service that has become the world’s second most popular instant chat platform. Messenger is also a free service.
This freedom to use Facebook’s products at no cost gives us the illusion that FB stock is a simple Internet company like the hundreds that came before it. The only difference is that Facebook is more popular.
But that story doesn’t ring true when the facts are brought under closer examination. Facebook isn’t a good company because of its popularity as a social media platform; it’s actually the other way around. People keep using Facebook because the company knows how to deliver an incredible experience. Make no mistake; this company is changing the world.
Here are a few examples of Facebook’s incredible initiatives.
Facebook Leads on Artificial Intelligence
Artificial intelligence (AI) technology, also known as deep learning, is one of Facebook’s lesser-known strengths. There’s a reason the advertisements on Facebook seem so tempting, why its recommended videos are so watchable, and why the company is making a solid profit. (Source: “Facebook’s Virtual Assistant ‘M’ Is Super Smart. It’s Also Probably a Human,” Re/Code, November 3, 2015.)
Facebook has developed a stunning AI algorithm that traces our habits and learns to predict them. Through this algorithm, it pairs the right ad or video with the right user. This is roughly the same way that Alphabet Inc operates “Google AdSense” and its trademark search engine.
All told, artificial intelligence drives many of the modern services we use. More and more companies realize that smarter analytics could help their businesses operate more efficiently. To help this process along, Google open-sourced its AI software by creating a platform called “TensorFlow.” However, Facebook went a step further. The company actually open-sourced its software and hardware, giving companies a chance to build their own AI technology. (Source: “Facebook Open Sources Its AI Hardware as It Races Google,” Wired, December 10, 2015.)
Sharing its valuable secrets may seem crazy, but I have no doubt Zuckerberg will eventually find a way to capitalize on it. After all, the doubters have underestimated him before.
People thought Facebook was getting ahead of itself by opening articles within the app and building a video platform, but the company soon disrupted both YouTube and the publishing industry, opening a pathway to massive revenues from content creators. Facebook charges them for access to their own followers on Facebook, a fee that most are happy to pay. See what I mean? Zuckerberg boosted Facebook’s bottom line, while keeping the services free to Facebook users.
Rising Revenues Promise Gains for FB Stock
The revenues for Facebook seem destined for exponential growth. There are so many new pieces being added to the puzzle and each one of them is magnified by Facebook’s enormous reach.
Take, for instance, the new donations feature on Facebook. The company introduced a product for charities to broadcast their mission as a means of boosting donations. But in order to make that happen, Facebook had to develop a payments system. Could this platform eventually expand into a full-fledged crowd-funding site like Kickstarter? It’s possible. (Source: “Introducing New Tools for Nonprofits,” Facebook Newsroom, November 18, 2015.)
Those are just a handful of the things that Mark Zuckerberg can do with Facebook. He has become one of the most talented executives in the world, so if I can see these opportunities, you know he can, too.
The benefits of these programs don’t have to fully mature before they get priced into FB stock. As soon as the broader market appreciates the scope of Facebook’s ambitions—that it’s not just a big Internet company, but a key component of the future—FB stock could shoot up to $200.00, $225.00, or even $250.00 per share.