The markets are an awfully confusing place, congested with a litany of diverging arguments. Especially for a beginner investor, deciding where to go is a potentially perilous experiment. But within the madhouse, a few names pop up that are seemingly above the fray. You can depend on them through good times and bad. Facebook Inc (NASDAQ:FB) is easily a top contender in this category. So, what makes FB stock so special?
The obvious answer is the enormous success that it has enjoyed. Since closing at $38.23 after its initial public offering, Facebook stock is now trading above $140.
In fact, shares set an all time closing record on Mar. 29, at $142.65. The only time that FB stock floundered was during its maiden year of 2012, when initial investors lost 30%.
That setback is of course well back in the rear-view mirror. Early concerns about FB being unable to monetize its business quickly faded due to its sheer dominance of its industry. What Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) aka Google is to the internet, Facebook is to social media and networking. Using the success of GOOG as a model, it’s not a stretch to imagine the same thing occurring to FB stock.
The measure of a company’s reach is obviously determined by how well it is known to the general public. For FB, they’ve changed our lexicon. Not only is Facebook a verb, its ancillary terms, such as “friending,” are used seamlessly in popular culture.
Facebook Stock Is the Investment of Tomorrow
As great as this is, the markets are “here today, gone today.” After rising so much over the past six years, it’s natural to assume that the growth potential is gone. While it’s difficult to say whether Facebook stock will crank out a few triple-digit returns like Netflix, Inc. (NASDAQ:NFLX) or Amazon.com, Inc. (NASDAQ:AMZN), shares offer plenty of long-term positives.
The future of FB stock was essentially secured back in the summer of 2015. That was when CEO Mark Zuckerberg announced that the company launched its solar-powered plane Aquila. More than just a cool science experiment, Aquila provided internet access to remote regions of the world.
It’s not so much the technology that went into this project, but rather, its implications. The social media giant has over 1.7 billion users that log onto their site on a monthly basis. That by itself is an impressive number for the company, and is more than enough reason to consider buying Facebook stock. Clearly, a majority of the subscription base comes from tech-savvy nations.
Management could just be content with what they have, which is an enormous global brand. Instead, they realize that the often hegemonic influence of the west is waning. In terms of true growth potential, the key markets are Africa and Asia. Despite being the most populous continents, they rank at the bottom of internet penetration. By launching projects such as Aquila, Facebook is asserting itself as the brand of tomorrow, not just of today.
That kind of smarts doesn’t come around too often. If I had to pick one reason why FB stock is a long-term no-brainer, this would be it.
FB Stock: A Discount Is Coming, But Don’t Over-Think It!
Having said that, I agree with InvestorPlace’s Serge Berger, who struck a balanced tone with Facebook stock. In his words, we should embrace the company, not chase it.
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FB stock is on a roll but typically in the markets, momentum isn’t a one-way street. For January, shares returned 11.5%, while the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY) was flat. Beyond that, February picked up nearly 2%, while March ended up with over 3% returns.
Essentially, Facebook stock hasn’t had a genuine correction since November of last year. You’d figure at some point, things will slow down a bit. We’re already seeing the first possible signs of that, with FB stock going nowhere so far this month. Don’t be surprised to see further modest downside before things start picking back up.
And pick up it will. While everybody aspires to get the best price, there’s a risk in over-thinking the opportunity in Facebook stock. I’d hate to see someone save nickels to lose dollars.
The bottom line for FB is that its leadership is one of the most innovative, forward-thinking teams ever assembled. They still have their focus on the day-to-day, which is why the stock is where it is right now. But they’re making sure that they’re relevant for future generations. As a steady rock in your portfolio, you couldn’t ask for more.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
