Mark Cuban is a billionaire investor, TV personality, and the owner of the NBA’s Dallas Mavericks; He knows a thing or two about money. The Shark Tank star was also kind enough to reveal his latest pick to the world, saying on CNBC that he’d taken the stock market correction as a chance to buy Facebook (FB) stock.
Since hitting all-time highs near $100 per share in July, Facebook stock got clobbered by the market meltdown, and closed yesterday off 17% from its highs. Cuban obviously thought that was a great discount.
To be clear, it’s never a good idea to blindly buy stocks based on someone else’s opinion — especially if you haven’t done homework of your own. But upon jointly considering Cuban’s credibility and the merits of FB stock itself on a standalone basis, buying Facebook stock actually looks like a pretty savvy trade.
Let’s take a look at why Market Cuban is bullish on FB — and why you should be, too.
Cuban’s Last Pick? NFLX
Before endorsing FB stock on Monday, the last time Cuban publicly got behind a big-name stock was in October 2014, when he announced on Twitter (TWTR) that he was going long on Netflix (NFLX). The Tweet has since been deleted, but it has been preserved for posterity by Bloomberg:
“I’m buying NFLX stock,” Cuban tweeted today. “At half of YHOO, 10B<Twitter and small pct of major media companies, someone will try to buy them.”
The closing price of NFLX stock that day (Oct. 17, 2014) was a split-adjusted $51.01. NFLX stock is up more than 100% since Cuban’s tweet. It’ll be hard for Facebook stock to appreciate that quickly, but I wouldn’t be surprised to see it rally past $100 per share in the next year.
Noting that he added some FB to his portfolio around $87, Cuban argued:
“[Facebook is] driving the ad economy, it’s driving content consumption in so many different ways, they’re doing a lot of things right. “
They certainly are.
Cuban also gave Google (GOOG, GOOGL) a shout-out as a dominant online advertiser.
Facebook’s Many Virtues
Where to begin? The biggest catalyst is simply what Cuban touched on: Facebook’s growing influence as an advertiser. Increasingly competitive with Google, Facebook’s 1.4 billion-person userbase continues to grow, and Facebook Video is emerging as a legitimate threat to GOOGL’s YouTube.
The company is only just beginning to monetize Instagram, the wildly popular social network Facebook nabbed for a cool $1 billion back in 2012. In retrospect, the Instagram acquisition looks like a steal. At the time there were 27 million users. Today, Instagram has more than 300 million monthly active users.
In the longer term, CEO Mark Zuckerberg’s ambitious vision to turn virtual reality (or “VR”) into more than just a gaming application could reap huge rewards. When Facebook bought the VR company Oculus, Zuckerberg spoke of creating a world where doctor visits, sports games, and lectures could all be attended virtually.
I wouldn’t hold my breath — virtual reality has a long way to go before fundamentally changing healthcare and entertainment — but I do believe FB is one of the best tech stocks to buy today and something most investors should own in their portfolio.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
