FB Stock Shall Keep Shining on These Growth Catalysts
Facebook Inc (NASDAQ:FB) refuses to rest on its laurels even after the number of global users touches almost two billion. Facebook stock is already up 21% in the year to date, which is way ahead of the benchmark index and is on its way to higher levels. The year 2016 was a dampener as investors did not like the prospect of increased investments in the future eating into the margins. But the latest results cleared all doubts. And the recent reports have been quite favorable for the company and its growth prospects.
Last week, a report by eMarketer Inc. estimates that U.S. digital ad spending will reach $83.0 billion this year, which is an increase of almost 16%. Moreover, it states that while Google parent Alphabet Inc (NASDAQ:GOOG, GOOGL) dominates search, Facebook rules display advertising. According to eMarketer’s forecast, the U.S. display business of Facebook will jump by 32.1% to reach $16.33 billion, which would constitute about 39% of the display market in the U.S. This would eat into the share of Alphabet owned Google, Yahoo! Inc. (NASDAQ:YHOO), and Twitter Inc (NYSE:TWTR). However, Google’s share of the search market is likely to grow by 16.1% to $28.55 billion in the year 2017. (Source: “Google, Facebook Increase Their Grip on Digital Ad Market,” eMarketer, Inc., March 14, 2017.)
The stock had touched a record high on Tuesday before ending lower. This is another good showing after Facebook stock had touched a high of $136.12 last month. The company posted impressive quarterly results last month, driven by the record mobile advertising revenue, besides higher user engagement.
Monica Peart, eMarketer forecasting analyst, said that users of Facebook are fascinated by videos, whether they are on “Facebook” or “Instagram.” This makes video the key driver of user engagement and advertiser interest. And this is one reason that will keep FB stock flying high in the coming days.
The video-first strategy has got a big boost from the Facebook management since Snap Inc (NYSE:SNAP) came along and disrupted the space for the social networking giant. Not only did Facebook copy Snap’s features for “Instagram Stories,” but it also introduced many new ones. And today, the success of Instagram is an envy and challenge of many rivals, including Snap. And the growth through video ads is just starting.
The chart below shows how Facebook stock has returned over 21% in the year so far whereas the broader S&P 500 Index went up by five percent in the same time period.
Chart courtesy of StockCharts.com
On Wednesday, Facebook posted that users across the globe can broadcast live video from their laptops or desktop computers. The company has also added a new feature that makes it easy to use streaming software or external hardware when going live from a computer. Following this update, users can now seamlessly share their screens, switch cameras, or insert graphics in “Facebook Live” videos.
For gamers, the new feature makes it easier to stream PC gameplay to friends and even engage with them while playing. (Source: “New Ways to Go Live: Now From Your Computer,” Facebook Inc, March 22, 2017.)
Users can go live with streaming software or external hardware directly from their “News Feed” or profile. The management is focused on making Facebook Live as interactive and enjoyable as possible, and this is likely to turn out to be another hit, pushing FB stock further up.
Last month, Facebook Inc had also got into discussion with Major League Baseball (MLB) to live stream one game per week during the upcoming season. With Facebook getting serious about sports content, FB stock prospects are bright. By live streaming a wide range of sports events, the company shall attract more eyeballs and higher ad revenue.
By becoming the preferred broadcasting medium, and focusing on video content, Facebook Inc is generating more attractive opportunities for advertisers. And it will continue to be a dominating force in online advertising. It appears that the sky is the limit for Facebook stock. There may be a few challenges along the way, but if the social media giant can get past them, FB stock investors can look forward to more gains in the future.