We have another day to celebrate, thanks to Facebook (FB). It’s called “Friends Day,” a day ordained by Facebook to mark its anniversary. Facebook clocks 12 today!
And Facebook stock has done something new this year to make the day memorable. It’s letting the world know about it through short videos it calls “Friends Day Videos.” These videos are a compilation of moments users have shared in photos.
Having seen and shared my own compilation (which I was able to edit), there is an emotional feel to it. This sort of thing makes you think Facebook is still a startup.
In short, this undertaking by Facebook stock is another reminder of how ridiculously good the company is at engaging users so they always come back. And that’s obvious in how its user base keeps expanding.
When the company reported its 2015 figures last week, huge revenue growth stole the headlines. Little was made of how great Facebook stock is doing at adding more active users. That’s understandable considering that a 3% quarterly MAU growth appears insignificant compared to a year-over-year quarterly revenue growth of 52%.
But you’d appreciate its user growth when you consider that it added 198 million active users in the whole of 2015. To put that in context, that’s only 11 million people short of Brazil’s population — no small feat, even for Facebook.
Facebook Stock Looks Toward a Big Future
And the growth potential is still tremendous. Zuckerberg noted at an event to celebrate FB at 12 that Facebook stock continues to work on connecting the whole world with its drone called Aquila, which would hover around a city, beaming internet access.
Zuckerberg is suggesting that a success with this project could see Facebook stock grow its user base to a whooping 5 billion users by 2030. That would be a 3.5 billion improvement on current figures. While that is a bit optimistic, it may be achievable.
That growth would mean an average of 233,333,333 annual increments. Factor the connectivity project it’s embarking into its current growth rate, and you might be surprised by how close this projection is to current figures.
Moreover, achieving this feat would mean FB is one of the three most influential (if not the most influential) companies in the world. My point is that Facebook could potentially give Alphabet (GOOG, GOOGL) a worthy fight for internet ad revenues, which are still growing.
Unfortunately, investors don’t realize the potentials in Facebook stock. In fact, most think Facebook stock is overvalued. Well, looking at a number of metrics, Facebook stock was once overvalued. But that stopped being true in 2013.
For the trailing 12-month period, Facebook stock has price-to-FCF ratio of 52. In addition, Facebook stock currently has a price-to-earnings ratio of 85. Sure, Alphabet looks better valued on first glance. But there’s a developing trend in the valuation of these companies that suggest that FB is on an undervaluation trip. Both Facebook’s price to FCF and PE ratios have been on a relative decline, while those of GOOGL are relatively on the rise.
Combine this with the growth potentials that lurk in Facebook stock, and you’d see that Facebook stock is easily a buy even at current levels.
As of this writing, Craig Adeyjanu did not hold a position in any of the aforementioned securities.
