Why Facebook Inc Is a Generational Company
Mark Zuckerberg was not your average student at Harvard. Maybe he enjoyed the finer things associated with going to college and living in a dorm, but he clearly also had time to think deeply about life and how to use the Web to connect people more effectively.
Now, 12 years after first coming up with the underlying structure of Facebook Inc (NASDAQ:FB) with a group of friends, Zuckerberg has become the richest millennial in the world.
All those long hours and nights writing code have paid off as Facebook is proving why it is the top momentum stock at this time.
The share price of Facebook stock traded at a record-high last Thursday that pushed its market value to a whopping $346 billion, becoming the sixth-biggest company on the S&P 500.
Chart courtesy of www.StockCharts.com
For a long time, I have been a big believer in FB stock, given its massive userbase of well over one billion users.
My thinking was Facebook could be a generational stock if it could somehow monetize its userbase and their addiction to be constantly connected. This has materialized.
The social media behemoth easily beat on both the top and bottom lines as far as earnings and revenue in its first quarter. Massive visits on Facebook, Instagram, YouTube, and Messenger all helped to drive revenues higher.
Facebook posted $5.38 billion in first-quarter revenue, well above the $3.54 billion a year earlier and the consensus of $5.25 billion, according to Thomson Financial.
Numbers Prove the Addiction to Facebook
A glance at the company’s report shows the staggering numbers that are helping to make Facebook somewhat of a perfect stock.
Zuckerberg has created a platform that is addictive, which is what you want to see.
For instance, the key monthly active users (MAUs) metric came in at 1.65 billion in the first quarter, up 15% year-over-year and easily beating estimates. Can you imagine adding China?
On a daily basis, Facebook attracted 1.09 billion users with 989 million users via mobile platforms. The mobile MAUs were a staggering 1.51 billion.
What was impressive was the fact that a whopping 82% of its ad revenue, or $4.2 billion, was driven by the critical mobile space.
The table shows the growth in mobile ad revenue as a percentage of total ad revenue over the past four first quarters.
FB stock is on a massive euphoric rise, but while the near-term prospects may be topping following the record move, the long-term outlook continues to be extremely bullish.
Trading near its projected five-year compounded annual growth rate for earnings and 29X its 2017 earnings per share (EPS), Facebook doesn’t look that stretched, especially if you believe the growth can continue.
Facebook is a big reason why Twitter Inc (NYSE:TWTR) continues to find itself. Now Facebook can easily swallow up Twitter, but I’m sure Zuckerberg believes he doesn’t need to do so, despite having $20.0 billion in the bank.
The bottom line is if there’s one social media stock to be bullish on, Facebook stock would be it.