More Upside for FB Stock?
Facebook Inc (NASDAQ:FB) stock seems to be the most appealing candidate for investors looking for a growth name among the market of large-cap tech firms.
The company’s metrics from its second quarter of 2016 and recent years outshine many of its closest competitors and other flagship brands in the tech sector. Its most recent earnings report showed FB stock exceeding analysts’ expectations yet again. Mark Zuckerberg and his fellow executives also provided some forward-looking statements explaining how Facebook will grow in the near future and throughout the next decade.
Comparing FB Stock with Other Tech Firms
Facebook stock has been outperforming leading brands in the tech sector for some time now. During 2Q2016, Facebook added 60 million customers, 20-times more than the number of Internet users joining Twitter. Facebook’s 55.5% five-year sales growth and 59.2% quarter-over-quarter sales growth trumped several industry-leading tech stocks, including Intel, Google, Apple, Cisco, and Microsoft. As well, Facebook’s 18.7% capital appreciation in 2016 is far ahead of all of the aforementioned firms, with Cisco being the only other stock gaining more than 3.5% since the New Year.
Facebook Inc is the only leading tech firm to have a zero debt-to-equity ratio. This firm also has the lowest short ratio among the above six large-cap tech stocks. Facebook’s 27.1% net profit margin and 39.6% operating margin are by far the highest among the six big tech firms. Facebook’s 32.2% capital appreciation over the past 12 months was the highest among these firms, but its 4.84% climb during 2Q2016 was the lowest. The 59.48 price-to-earnings ratio shows that Facebook is coveted much more than the other six tech stocks. This recent lull in capital appreciation may be an opportune time to consider investing before more bullish traders join in.
FB Stock Has Impressive Second Quarter
As of 2Q2016, Facebook stock has only missed exceeding analysts’ expectations one of 18 times since the date of its IPO. Total revenue increased by 59% year-over-year to $6.44 billion, while Facebook’s net income still totaled $2.05 billion. (Source: “Takeaways from Apple, Facebook and Google’s latest earnings – Kapko,” CIO, July 29, 2016.)
Reports from this most recent quarter counted 1.1 billion people using Facebook every day and 1.7 billion people accessing the web site on a monthly basis. Facebook now has more than one billion mobile users active daily and exceeded $5.0 billion in mobile ad revenue during the second quarter. Mobile ad revenue now accounts for nearly 85% of the firm’s total advertising sales. (Source: “Facebook Puts Google on Notice in Search Advertising (FB, GOOG) – Fuscaldo,” Investopedia, July 28, 2016.)
The social network’s userbase continues to experience strong growth. More importantly, the majority of this success is being driven by emerging markets outside of the U.S. More than 85% of Facebook’s 1.7 million monthly active users (MAUs) in 2Q2016 were actually located outside of North America, with more than one billion coming from Asia and places outside of Europe.
Not only is Facebook acquiring more MAUs each quarter, but the average revenue per user (ARPU) has been increasing as well. Worldwide, Facebook’s ARPU increased by 38.4% year-over-year, but in the U.S., ARPU increased by a whopping 54.19%. (Source: “Facebook Earnings Review: The Best Is Yet to Come – Chandrasekhar,” GuruFocus.com, July 31, 2016.)
What’s Ahead for Facebook Stock?
The most impressive aspect of Facebook’s position is that the current operation is still in its preliminary phase and has not been fully integrated with the commercial sector yet. According to Zuckerberg, Facebook is currently in the second stage of a three-phase monetization plan. On the recent earnings call, the Facebook founder categorized Facebook’s trajectory into a three-year, five-year, and 10-year timeline. (Source: “Facebook (FB) Mark Elliot Zuckerberg on Q2 2016 Results – Earnings Call Transcript,” Seeking Alpha, July 27, 2016.)
For the near term, Facebook is still building the existing community and helping individuals share valued content. Within five years, Facebook is focused on integrating new products into complete ecosystems.
Within the next decade, Facebook’s ultimate plan is to begin building new technologies that enable consumers, businesses, and developers to connect in innovative ways. With more than two billion Facebook searches occurring on a daily basis, entering the search advertising sector dominated by Google is the next disruptive move on the docket for Facebook.