Facebook Stock Gains 18% in the Year and Is Poised to Go Higher
FB Stock on a Record High on These Three Factors
Facebook Inc (NASDAQ:FB) stock hit another record high of $136.12 on February 22, and investors are expecting the stock to post new highs.
FB stock is up almost 18% in the year-to-date as compared to the S&P 500 Index, which is up six percent in the same time period. What is it that keeps the Facebook stock juggernaut rolling?
First, it is the phenomenal reach that the social network has across the globe. With a formidable number of users that is about to reach almost two billion, Facebook Inc is one of the favorites of advertisers; the other one being Google parent Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL).
Facebook, along with Google, is the leading player in the digital advertising space, and there is no competitor in sight that can displace these two from their top positions. This is the reason that Facebook shares have limited downside.
Second, with over 600 million active monthly active users, Instagram is alive and kicking. It is no secret that Facebook took a leaf out of Snapchat’s book to increase the appeal of Instagram to youngsters, but its “Instagram Stories” is a hit. Instagram Stories has reached 150 million daily active users within five months of its launch and Facebook has also added new features like “Boomerang” and “Live” to Stories. As Snapchat parent Snap Inc. makes its debut on the NYSE soon, Instagram, as a photo-sharing and video-sharing app, is Facebook’s most potent weapon and will likely keep FB stock flying high.
And saving the best for the last, Facebook is aggressively pursuing the emerging high-growth areas like live videos in order to improve customer engagement and expand ad revenue channels. The company sees video as a “mega trend” on the same order as mobile, and this is why Facebook keeps putting video first across all its apps.
Facebook is apparently in discussions with Major League Baseball to live stream one game per week during the upcoming season. Sports content is important, as this is one event that people love to watch live. Given the global reach of the social networking giant, there is tremendous opportunity in live streaming a wide range of sports events. Facebook stock will likely ride high on this wave. (Source: “Exclusive: Facebook in talks to live stream one MLB game per week – sources,” Reuters, February 21, 2017.)
Early this month, Facebook had also announced the launch of a television app that would help it compete for TV ad dollars. The new app would allow users to stream videos in their news feed through set-top boxes such as “Apple TV” by Apple Inc. (NASDAQ:AAPL) and “Amazon Fire TV” by Amazon.com, Inc. (NASDAQ:AMZN). (Source: “Facebook Announces Launch of Television App,” The Wall Street Journal, February 14, 2017.)
The new app will allow users to watch videos shared by friends, publishers, or the people they follow. There will also be live broadcasts from around the world. Dan Rose, Facebook’s VP of partnerships, said, “We want people to be able to consume content wherever they are – whether it’s on their phone, whether it’s on their computer – and TV is just another screen for that.” (Source: Ibid.)
Below is the chart that shows the movement of FB stock since the start of the year.
Facebook Stock to Continue Its Upward March
The fourth-quarter and full-year 2016 results announced by Facebook on February 1, 2017 are an indication that Facebook stock’s momentum is not likely to slow down in 2017. The user engagement remains high, which allows the company to enjoy high ad revenue.
FB shares will also get a boost as Facebook is close to reaching two billion monthly active users by the middle of this year. Together with the company’s “video-first” strategy, Facebook would likely be one of the most lucrative platforms for advertisers.
FB stock closed at $135.44 on Friday and investors are bullish on the future money-making potential of Facebook. Facebook stock investors have a lot to look forward to this year and, in all probability, they will not be disappointed.
