Here’re Three Catalysts That Could Lift Facebook Stock in the New Year
Facebook, Inc. (NASDAQ:FB) is the undisputed king of social media. Many were skeptical about Facebook stock after the company’s initial public offering, questioning how a free-service social media web site could pull revenue growth from its basic business model. But now FB stockholders are getting the last laugh, with shares closing in on all-time highs this week.
Dose Facebook stock have even more upside? Definitely. Here are three ways the company is revolutionizing its future growth. I believe if the moves rightly pay off, Facebook stock is going to continue the upward trajectory in 2016.
The latest bombshell out of the Facebook headquarters is the introduction of a new search feature called Search FYI. The social media giant has reportedly indexed over two trillion public posts on the web site and the company skipper, Mark Zuckerberg, decided to bring them to use. The daily searches on Facebook stand at a whopping 1.5 billion.
With Search FYI, users will be able to search more than just pages, groups and friends. Now they will be able to search public posts from around the world to follow what people are saying on popular matters. This will come as a massive blow to Twitter, Inc. (NYSE:TWTR), which is usually cited as the more mature platform for news. This will also bring Facebook head-to-head with Alphabet’s Google search engine, as users will carry out their ordinary searches within the app without having to leave it to hop over to Google.
The company has rolled out the service this week but hasn’t yet monetized it. Count on it, though, that you will soon be seeing ads on search results, too. This will become another big source of revenue from within the company’s core business.
The “Buy” Button
The second feature that Facebook rolled out earlier this year is its shopping page that the company is in the process of testing. The web site has introduced a “buy” button for products of some selected merchandise advertisers in the U.S. The ads appear in users’ newsfeed and users can directly buy products on Facebook without having to leave the web site.
The best part is that buyers share their information with Facebook only, not the merchandise sellers, meaning the information stays in safe hands. This is a huge step in the e-commerce world where Facebook will be directly challenging giants like Amazon.com, as sellers will make a move to reach out to Facebook’s over billion users. Facebook is poised to pull out massive ad revenue from this initiative.
Finally, the third biggest move of this year is the rumored launch of a YouTube-like “Video Channel” within Facebook—a new tab in the menu section for users to watch, save, and recommend videos. Facebook has already introduced a “suggested videos” feature, similar to YouTube’s suggested video feed, that pops up when users click on a video in their news feed—a great way to increase views.
The popularity of online video streaming can be gauged from the fact that all big Internet giants are trying to capture the biggest share in this market. We have lately seen Alibaba buying China’s equivalent of YouTube, Youku Toudu, seeing great value in the business model.
The monetization opportunities in the video streaming space are likewise endless. Not only can you win from ads, but also make money off of “no ads.” Google has recently launched an ad-free subscription service, YouTube Red, allowing users to stream YouTube videos free of ads for a monthly fee of $9.99.
This will be a great opportunity for Facebook to further ramp up its ad revenue. Companies that spend millions on TV commercials can now target the generation of social media that spends more time on YouTube than before TV screens.
Here’s the Bottom Line on Facebook Stock
Facebook boasts the highest number of average monthly active users (MUAs) at 1.5 billion, a number the competing social media companies, Twitter and LinkedIn, receive even in over three month’s time.
Facebook earnings have been growing at an attractive rate and I see the growth to further increase over the next year. The stock has shown great returns side-by-side its revenue growth and is expected to multiply in value by 2016 when the dividends from its three big moves this year start to pay off.
Long story short; there’s likely a lot more upside left in Facebook stock.