Whenever I talk with people about social media stocks, everyone is quick to declare the impending death of Facebook (FB). I am sure you have heard the same chatter that I have over the past few years.
Facebook is not cool any more. Facebook is full of moms and grandmas posting recipes and pictures of their grandkids. The young hip crowd is on Twitter (TWTR), Instagram and other new social media sites. Does anyone every click on a Facebook ad? I never have. Who cares how may eyeballs they have if they cannot monetize them? I have heard these and more as to why Facebook is doomed, and we should sell FB stock.
I am sure the executives at Facebook have heard them as well, but they are doing a great job of ignoring the dire predictions and growing the business. In the recent earnings release, Facebook had earnings growth of 59% and profits grew by 76% year over year.
Facebook has its fourth consecutive positive earnings surprise. Margins expanded from 37% to 44% compared to 2013. Facebook is having a great deal of success selling those ads no one clicks on as ad revenues were up a whopping 64%. Apparently, grandma is doing more than sharing recipes when she is on the website!
The number of users continues to grow as well. Daily active users were 864 million on average for September 2014, an increase of 19% year over year, while monthly active users grew by 14% to 1.35 billion. Mobile usage is also growing as mobile daily users were up 39% and active monthly mobile users grew by 29%. That’s pretty good growth for a site no one uses anymore!
While everyone else has pontificated about the future of Facebook and which hit new social media site would soon replace Facebook, I have ignored the chatter and relied on the numbers. Portfolio Grader upgraded Facebook shares to a “strong buy” last December and have remained so since then. Over the course of the year, Facebook earnings have grown by 90%, and those who use Portfolio Grader to select the best stocks have seen their Facebook shares rise by more than 50% since then.
Facebook may well slip and lose its social media leadership some day in the future, but it is not happening anytime soon as Facebook is still growing. Plus, Facebook’s fundamentals are improving quarter by quarter. Facebook is still a “strong buy” at the current price.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
