Facebook Inc (NASDAQ:FB) was only up 25% in the past 12 months. Yes, that’s a respectable amount, but considering that its forward price-earnings ratio is 20, and it just smashed earnings again, you would expect FB stock would be much higher, especially in this heady market.
For comparison, Netflix, Inc. (NASDAQ:NFLX) and Weibo Corp (ADR) (NASDAQ:WB) sport P/E ratios of 330 and 105, respectively.
Another thing to remember with Facebook is that it is consistently firing on all cylinders: The growth here is real, not manufactured by the accountants. Mark Zuckerberg & Co. have positioned Facebook squarely in some of the most significant megatrends in the tech sector, and Zuckerberg knows how to monetize its position.
That can’t be said of many of the stocks that are having a field day right now. Earnings buybacks and other sleights of hand have kept them “growing,” but FB stock is truly killing it. If there is a correction, Facebook shares have nothing to fear. The success of FB stock isn’t a grand illusion. It’s real.
Facebook is turning into a core tech company right before our eyes. When it first went public, FB’s vision was ahead of its execution. But now that technology has caught up with CEO and founder Mark Zuckerberg’s vision, it is growing earnings like it used to grow members.
And its member rolls continue to grow. Facebook’s monthly active users grew 17% to 1.86 billion. Daily users were up 18% to 1.23 billion. WhatsApp users are now up to 1.2 billion users. Messenger has now crossed the 1 billion user mark as well.
This is where things get interesting. Advertising makes up 98% of Facebook’s revenue. That means, the more eyeballs it gets, the more advertising is worth. Its daily and monthly user growth is amazing considering that it means almost 20% of the world’s population has a Facebook page. And that’s not to mention the other services offered under the Facebook umbrella.
Also, the trend in advertising is shifting away from cable and toward more specific markets online. Because the social network has pumped so much money into its back-end artificial intelligence to build digital profiles of its users, Facebook is a compelling avenue for advertisers.
What’s more, mobile is where the next generation of users are going. The company continues growing its mobile user base. And now that bandwidth has expanded, video is another megatrend that is just starting to pay off for FB.
The simple fact is, it’s an advantage for FB to be be so heavily reliant on advertising because it is on the bleeding edge in a huge online advertising boom. It also means its other projects, like Oculus Rift, won’t be expected to earn their keep until they’re more than ready.
Forget about Snap Inc (NYSE:SNAP), go with the company that has a proven path of growth.
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.
