Hot stock! Facebook makes chief Mark Zuckerberg even richer, ranks 5th in billionaire list; should you buy its shares?
Facebook has reversed the losses trend, and have made consistent growth in their share price so far this year.
A new ray of hope is being seen for Mark Zuckerberg, as experts believe Facebook is a stock to buy ahead. Last year has been a very challenging period for Facebook and chief Zuckerberg due to data breach scandal, so much so, that forget investors even its own customers lost hope in this giant social media who has more population than even countries like China and India. However, 2019 comes with good news finally for Zuckerberg, as Facebook is seen as a money stock in large caps. This means not only investors, but also Zuckerberg will see rise in their wealth because of Facebook. To your notice, Facebook has reversed the losses trend, and have made consistent growth in their share price so far this year.
The Facebook shares finished at $171.16 up $1.91 or 1.13% on Nasdaq. Interestingly, the stock has gained a whopping 24% since the beginning of 2019, indicating the potential this year. The stock was trading near $138 level on Nasdaq, in first week of January, 2019, and since then has grown commendably.
Facebook has posted its Q4 earnings, under which its monthly active users (MAU) were up by 9% reaching 2.32 billion compared to a year ago same period. The company’s net income came in at $6,882 million in Q42018 versus income of $4,268 million in Q42017. However, operating margin decelerated to 46% as against 57% in Q42017, but was up from 42% in Q32018. Income from operations was still better at $7,820 million from $5,781 million in Q32018 and $7,352 million in Q42018.
Average revenue per user (ARPU) grew across nations globally. In Q42018, ARPU worldwide stood at $7,37 vs $6.18 in Q42017. On geographical basis - ARPU in US & Canada was at $34.86 versus $26.76 of Q42017, whereas in Europe the ARPU came in at $10.98 versus $8.86 in Q42017. In Asia-Pacific region, ARPU was at $2.96 slightly higher compared to $2.54 in Q42017, meanwhile ARPU in Rest of World was at $2.11 versus $1.86 in Q42017.
Why Facebook is a hot stock?
John Huber, Portfolio Manager at Saber Capital Management, LLC, in a research note of Sumzero a largest community of investment professional, explained that, the durability of Facebook’s platform is stronger than many believe, and the underlying economics are still intact. The negative sentiment is extreme, and has created a rare opportunity.
Huber says, “ This is a company that grew its revenue by 49% last year, and while growth will obviously slow from that level, Facebook is one of the most profitable businesses in existence and still has a very long runway ahead. If you have the ability to look out two or three years, this is the time to be capitalizing on that fear.”
In Huber’s view, Facebook has one of the best businesses in the world. In some ways it operates like a traditional media company that provides content to readers and collects advertising revenue from businesses who want to reach those readers. But the key difference is that Facebook has the largest readership base in the world (2.3 billion people), and the readers themselves provide the content for free. This is why John Malone once said Facebook has the “best business model that’s ever been created”.
“Facebook’s business is still growing fast (33% revenue growth last quarter), and despite the company’s large size, the runway is still long,” said Huber.
Huber also believes that, Facebook is well placed in terms of market share. He says, “Facebook has roughly 5% of this market, which I think is a share that will inevitably rise over the coming years as advertising dollars continue to shift from traditional media to the much higher ROI advertising platforms like Google, Facebook, and Amazon.”
Talking about the stock, Huber says, “the key to analyzing Facebook is not to get precise with forward estimates, but to determine whether the company’s network will remain strong. If so, the stock is very cheap.”
Facebook generates far more cash than it can use, and it’s likely that Facebook spends more of its growing cash hoard ($42 billion, or $15 per share) on buybacks, explains Huber.
Thereby, Huber believes that, Facebook’s expected return is 51.72% ahead from its market price of $140.
This means that, Facebook has already started to show signs of growth in 2019. Hence, buy it before its too late! The Facebook rise is already witnessed in Zuckerberg's wealth who lost the most among richest people last year.
According to Bloomberg Billionaire Index, Zuckerberg has once again entered the top-5 richest people club, taking the fifth rank with net worth of $66.6 billion. His net worth has risen by $14.6 billion so far in 2019.
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