The Real Winner in the Age of Social Media By TipRanks
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Facebook (NASDAQ) stock has enjoyed a spectacular run since it was made public in 2012. The company’s shares have risen more than 850% in this period, demonstrating its dominance within the online advertising sector. Alphabet’s Google (NASDAQ:), combined with Facebook, make for a veritable duopoly in the U.S. online advertising space.
Facebook’s rapid rise to this point is not surprising. Globally, social networking is becoming more embedded in daily life. As of today, more than 80% are active on social media. Facebook boasts a staggering 2.9 billion monthly active users.
This is quite impressive.
Facebook has experienced a few headwinds over the years. The old Cambridge Analytica scandal was connected to 2016 elections, but most people have forgotten. There have also been several regulatory investigations into Facebook’s monopoly-like character.
Recently, Facebook was also criticised by regulators for its whistleblower testimony, which many consider damning, about Facebook’s decision to prioritize safety and profitability over user safety.
Investors face enough challenges to keep their heads spinning. FB stock is incredibly resilient in recent years.
This is why I am bullish for FB stock despite recent bearish sentiment. (See Facebook stock charts on TipRanks)
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Amazing Value
FB stock, the latest entrant in the exclusive $1 trillion club market cap club, has witnessed impressive investor buying. Facebook is one of many stocks that has been leading the recovery of pandemic lows in the stock market. It remains one the most important holdings of various ETFs and index funds.
Despite this, Facebook’s valuation ranks amongst the top of its peer group.
FB stock is currently trading at a ratio price/earnings of under 25. The NASDAQ’s current price-earnings ratio is just below 30. This stock, therefore, is inexpensive on the basis of its fundamentals.
It’s amazing to see such an excellent company trading at this many multiples, considering the high valuations of other mega-cap stocks. Facebook continues to see rapid growth in its top and bottom line, which makes the PEG ratio of the company among the best.
Facebook’s value is best viewed in the context of Tesla’s high-flying valuation. While Amazon’s is at 57, Netflix is at 64, Netflix is at 66 and Apple is at 28.
Facebook’s value is clear evidence that investors now consider this stock a mature investment. Facebook has maintained a valuation below 35 years, which may have been a reflection of the company’s rapid growth.
This could be a very appealing upside for investors in long-term growth, if Facebook keeps its promises.
It is remarkable that Facebook has been able to survive the crisis and remain at the forefront of innovation in online advertising. The company has a loyal and long-standing customer base and many other platforms are growing at lightning speed within its portfolio.
Long-term investors should therefore like FB stock from a numbers perspective.
What are Analysts Saying about FB Stock
As per TipRanks’ analyst rating consensus, FB is a Strong Buy. There are 31 analyst ratings. 25 buy recommendations, 5 hold recommendations and 1 sell recommendation.
This stock has an average Facebook price target of $419.87, implying an upside of 27.2%. Price targets for analysts range from $300 to $500 per share, and as high as $500 to $600 per share.
The Bottom Line
It’s clear that FB stock has a high long-term potential for growth and is available at a lower price than other stocks. The company’s handling of the various scandals that have arisen in this more regulated environment is still to be determined.
It’s possible for some kind of valuation discount to prevail in the near term. But, the company’s long-term growth is too rapid to remain this low for very much longer.
Disclosure: Chris MacDonald didn’t hold any positions in the securities listed in this article at the time it was published.
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