Facebook Inc (NASDAQ:FB) is trading at a record high once again, clearing the $150 level for the first time on Friday. It’s been an incredible run for Facebook stock, which traded below $18 less than five years ago. Since then, FB stock has risen by over 700%. It’s added some $370 billion in market value over that span. That’s enough to buy Exxon Mobil Corporation (NYSE:XOM) or JPMorgan Chase & Co. (NYSE:JPM) at current prices!
There are good reasons for the gains in Facebook stock. It has become the world’s dominant social media platform. Facebook earnings continue to increase nicely. What’s notable at the moment is that even after climbing by 8x, FB stock still isn’t all that expensive.
Those are just a few of the reasons why Facebook stock deserves its record high — and more.
Facebook Will Continue to Dominate Advertising
Advertising continues to move online — but that shift hasn’t been without its problems.
So-called “click fraud” will cost businesses as much as $16 billion in 2017, according to one report. For many off-line businesses, the ability to track ROI and other metrics hasn’t been quite was promised.
The famous quote from retailing pioneer John Wanamaker — “Half my advertising is wasted; I just don’t know which half” — still applies today.
To be sure, Facebook has had some issues with measurement metrics of its own. But it’s publicly disclosed those issues and pledged to fix them. Meanwhile, over at Alphabet Inc (NASDAQ:GOOGL), YouTube is dealing with advertiser concerns over placement.
With concerns about the broader online ad ecosystem proliferating, advertisers increasingly are turning to Google and Facebook. A recent report suggested that 99% of all digital advertising growth — 99%! — accrued to the two giants last year. With Google and YouTube scuffling, Facebook has an opportunity to take share from Alphabet’s units.
That leaves Facebook in prime position to be the platform of first and last resort for advertisers.
Facebook Stock Isn’t Expensive
Amazingly, given its growth and dominance, FB stock is rather cheaply valued. Facebook stock, backing out its ~$10 per share in cash, trades at under 21x 2017 analyst earnings estimates.
Think about that. There are concerns about Facebook’s business — “fake news,” whether new competitors like Snap Inc (NYSE:SNAP) can take share, and international growth — among them.Incredibly, that forward multiple is lower than that of The Coca-Cola Co (NYSE:KO).
But which business seems more likely to grow in the next 10 years? The company facing soda taxes and millions of customers swearing off its products? Or the one so popular that more than one out of every four people in the world is a registered user?