Facebook (FB) was trading at $329.51 on April 29. But the stock retreated to $315.02 in early May, popped back up in the days that followed and then again declined, this time falling to $305.00.
FB is intriguing as a prospective investment because the company generates cash from several revenue sources. In addition to revenue stemming from its platform advertisements, FB also makes money through Oculus VR (virtual reality technology), WhatsApp, LiveRail, Onavo, PrivateCore, the uber-popular Instagram platform, and additional subsidiaries and e-commerce initiatives.
So given its diverse revenue channels, the question is when and to what degree will FB bounce back following its recent decline? Let’s find out.
FB Points of Note
FB is currently trading approximately $25 below its 52-week high of $331.81. The stock's 52-week low is $200.69. Its 23.44 forward P/E ratio is tolerable because it is nearing its 52-week high and operates in the typically overpriced tech space. Add to that the fact that FB has a low beta of 1.30--meaning it will not prove dizzyingly volatile when the market moves--giving investors one more reason to consider establishing a position in the social media behemoth.
2.85 billion individuals worldwide visit FB's social media platform each month. An additional 600 million unique visitors use FB's Instagram platform and WhatsApp messaging service. In aggregate, 3.45 billion individuals, equating to nearly 45% of the global population, visit an FB-owned asset at least once per month. Therefore, advertisers are flocking to FB.
In total, FB generated $25.4 billion of ad revenue in the first quarter of 2021. This represents a 46% increase from the same quarter one year ago. FB’s revenue will likely increase further in the quarters ahead as the company perfects the monetization of its messenger services, Facebook Pay and additional e-commerce initiatives.
FB's sizable quarterly revenue jump is meaningful considering the company's revenue growth in the prior year was a comparably meager 18%. It should be noted that FB reported 146% revenue growth in its revenue category dubbed "other", representing Oculus VR virtual reality tech and the company's ever-growing e-commerce money-makers.
The Analysts’ Take on FB
The top analysts who have performed deep dives into FB are slightly bullish on the social media powerhouse. They have established an average target price of $340.54 for FB. If FB rises to this level, it will have increased by nearly 5%. The analysts' high target price for FB is $418.00 and their low target price for the stock is $220.00. In total, 48 analysts have issued FB recommendations. Eighteen of these analysts view FB as a Strong Buy, 27 consider it a Buy and three consider the stock a Hold. No analysts consider FB a Sell or Strong Sell.
FB has a B POWR Rating grade. The stock has A grades in the Quality and Sentiment components of the8 of these analysts view FB as a Strong Buy, 27 consider FB a Buy and three consider the stock a Hold. No analysts consider FB to be a Sell or Strong Sell.
FB POWR Ratings POWR Ratings. However, FB has a C grade in the Momentum and Value components. Click here to learn more about how FB fares in the Stability and Growth components of the POWR Ratings.
Out of the 70+ stocks in the Internet category, FB is ranked 5th. One can learn more about the publicly traded companies in the Internet segment by clicking here.
Is FB’s dip a Buying Opportunity?
FB continues to broaden its horizons by diversifying its revenue streams across social media, virtual reality, online transactions and possibly even its own cryptocurrency at some point in the future. Though there is always the potential for the Biden administration to push for a breakup of FB, because an argument could be made that the company is a social media monopoly, we think such an event is unlikely. In other words, there is little to lose and much to gain by investing in FB in the aftermath of its recent decline.
FB shares were trading at $312.14 per share on Friday morning, up $6.88 (+2.25%). Year-to-date, FB has gained 14.27%, versus a 11.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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