Facebook Stock Will Hold Steady
By Dan Burrows
Don’t expect Facebook (FB) to put up a repeat performance in 2014. It’s unusual for any decent-sized stock — much less one with a giant market cap — to double two years in a row. Sure, it could happen to FB stock, but probability is against it.
Consider that this year’s move in Facebook stock more than doubled the market cap to $136.41 billion. For FB stock to double again, it would need to add another $136 billion to hit more than $270 billion in market cap. It’s much, much harder to grow rapidly off a bigger base.
Then there’s the case that Facebook is a momentum stock; it could go cold at any time. The market rewarded FB stock this year for its mobile strategy, but momentum investing is very much a what-have-you-done-for-me-lately game.
That said, it is hard to imagine the market putting up another year of solid gains without Facebook stock participating. Historically, great market years are usually followed by good ones, notes Sam Stovall, chief equity strategist at S&P Capital IQ.
If the S&P 500 rises another, say, 10% in 2014, it’s easy to see Facebook stock outpacing it, if only because it means equities are in favor, and Facebook profits are increasing so much faster than the broader market’s.
No, you can’t expect FB stock to go ballistic again in 2014, but it does still look like a market-beater, and that makes it a buy.