Facebook Stock Has More Room to Grow
Facebook Inc (NASDAQ:FB) reported fourth-quarter and full-year results Wednesday and the numbers beat expectations across the board. The content powerhouse announced its Q4 results, which were spectacular. Although the company issued a cautious outlook, FB stock closed at a high of $133.23.
Revenues touched $8.8 billion in the fourth quarter of 2016, a jump of 51% year-over-year as mobile advertising soared. The mobile advertising revenue represented approximately 84% of advertising revenue for the fourth quarter of 2016, up from about 80% of revenue from advertising in Q4 of 2015.
The highlights of the full-year 2016 were the mobile monthly active users at 1.74 billion, which was an increase of 21% year-over-year, and mobile daily active users at 1.15 billion on average for December 2016, an increase of 23% year-over-year.
In the conference call, the management was upbeat about the good quarter and the way Facebook ended the year. The company has seen continued growth and engagement on its platform, with the ad business doing great. There are nearly 1.9 billion people who use Facebook every month and more than 1.2 billion use it daily. (Source: “Fourth Quarter and Full Year 2016 Results Conference Call,” Facebook Inc, February 1, 2017.)
Although there were concerns surrounding the placement of ads in the news feed, the results beat expectations across the board. But the company has been warning that its ad revenue growth will come down meaningfully in 2017. The cautious outlook impacted the rise in Facebook stock.
In the earnings call, the company management gave an overview of the future direction for Facebook Inc.
Facebook Stock to Ride the Video Megatrend
In the earnings call, Mark Zuckerberg was emphatic about the company’s video ambitions. He said that video is the “megatrend,” on par with mobile. That is why Facebook will keep putting video first across its family of apps and making it simpler for people to capture and share video in new ways. This strategy has already started paying off for the company and is likely to put FB stock ahead of others.
The company has added a tab at the bottom of the “Facebook” app with top videos and recommendations. This makes it easier for users to find and watch videos. Facebook is also focused on improving live video as more and more people use it. The social networking giant is experimenting with live 360-degree video, audio-only live for people with slower connections, as well as live face masks and more camera effects.
Zuckerberg further added that they are looking at ways to grow the ecosystem of video content on Facebook and want people to think of it as a place for relevant and interesting content from professional creators as well as friends. The whole objective is to make people come to Facebook whenever they want to watch videos or want to be updated about their favorite show. (Source: Ibid.)
Last year, Facebook started to invest in more original video content to help develop the ecosystem and will be investing more in 2017. Facebook wants to capitalize on the huge video ad opportunity, which is likely to help FB stock go further up.
Instagram and VR Give FB Stock a Head of Steam
Talking about another pillar of growth, Instagram, Zuckerberg highlighted the strong growth and engagement on Instagram, which recently passed 400 million daily active users. “Instagram Stories” reached 150 million daily active users just five months after the launch, and the company has added new features like “Boomerang” and “Live Stories.”
Facebook will continue investing in these platforms, giving users a more personal and immersive experience. The company has big plans for virtual reality (VR), which Mark Zuckerberg believes is the next computing platform.
With the likelihood of more acquisitions in the VR space, Facebook is expected to become a dominating force in the social VR space. This could be an added boost to FB stock. Zuckerberg said that Facebook will keep on making big investments in VR content, and a lot of new games and immersive educational experiences are lined up for 2017.
Facebook stock has lot of room to grow as the company continues to focus on its three priorities: capitalizing on the shift to mobile, growing the number of marketers using ad products, and making Facebook’s ads more relevant and effective. As the company continues to invest in these areas, investors will reap more rewards in the year.