Facebook Inc (NASDAQ:FB) stock isn’t cheap by most measures. Up 25% in the last year, shares trade for 75 times earnings, and more than 33 times forward earnings. That’s a steep premium to the S&P 500, which trades for trailing and forward P/Es of 20.5 and 17.6, respectively.
You know what they say: You get what you pay for.
Despite boasting almost 900 million daily users, Facebook — and FB stock — still enjoy mouth-watering growth prospects, though increasingly they’ll be fueled at the expense of fellow Silicon Valley titans like Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL).
Zuckerberg Is Heavily Wooing Developers for FB
Facebook’s laser-like focus is on developers.
There’s only so much top-tier talent in the tech world, and the biggest players in technology are all constantly gunning for the best of the best. With that in mind, FB is expected to make a major overture to some of that talent this week at the F8 Facebook Developer Conference in San Francisco.
What investors hear from Facebook — and particularly how developers themselves respond to the conference — will be vitally important for FB stock. That’s because the F8 conference, at its core, is about growing revenue by convincing developers to work with Facebook’s offerings.
Other than the Facebook social network itself, FB CEO Mark Zuckerberg wants to see developers hop on board with its messaging applications and its virtual reality project, Oculus. Both areas could be huge catalysts for FB stock going forward.
In messaging, Facebook Messenger is expected to open up to third-party applications at the F8 conference. As InvestorPlace reported on Friday,
“Facebook Messenger has 500 million users. The company has been looking to make the app more ‘more useful, expressive and delightful.’ The addition of third-party apps might do just that.”
It’s a logical next step in the evolution of Facebook Messenger, which just last week began rolling out a service allowing friends to pay each other through the application. With a 700 million-person userbase in the messaging service WhatsApp also hiding not-so-slyly up its sleeve, FB is going up against the likes of AAPL, eBay Inc (NASDAQ:EBAY), GOOG, and others in the red-hot mobile payments space.
While Facebook hopes to boost the usability and utility of its widely used messaging applications, FB also needs developers to buy into its visions for virtual reality, where the company has a $2 billion investment in the immersive gaming company Oculus.
It may sound like the stuff of sci-fi, but FB has big dreams for Oculus, and it sorely needs third-party apps from developers to drive a compelling user experience. For what it’s worth, Zuckerberg also sees Oculus headsets as a tool for far more than just gaming. In a Facebook post announcing the Oculus VR acquisition, he elaborates:
“Imagine enjoying a courtside seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face — just by putting on goggles in your home.”
Earlier this year, I dreamily fantasized about what this vision, if realized, could mean for FB stock:
“Imagine the sort of ungodly sums that Oculus could drive in revenue for Facebook. Not only would Facebook sell the Oculus Rift device itself, but as owner of the platform it could take a cut of app/game sales. If doctors’ visits and the experience of courtside seats can truly be replicated, FB could take a cut of those sales as well.”
As of this writing John Divine owned shares of AAPL stock, GOOG stock, and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at email@example.com.
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