Facebook (FB) is one of the hottest tech stocks out there. FB stock is up around 26% year-to-date and almost 80% since Jan. 1, 2014, thanks to improvement in its already impressive user base, a successful shift to mobile and the ever-improving “monetization” of users from Facebook’s advertising strategies.
But is FB stock overbought after this run now that it boasts a rather inflated forward price-to-earnings ratio of about 37 and a forward price-to-sales of about 16?
John Divine, Assistant Editor for InvestorPlace.com, says heck no. And here are the three biggest reasons that he is bullish on FB stock even after a nice run:
Instagram Ads: With 300 million users on Instagram offering up a potential $2 billion in additional revenue potential, FB stock doesn’t have to rely on just its namesake platform for growth. That’s a very good thing.
Facebook Video: Video ads are huge earners for digital media companies, and Facebook is looking to horn in on Google (GOOG, GOOGL) and YouTube territory via FB’s own video content efforts with, of course, video advertising to go with it.
Oculus VR: This isn’t a short-term plan by any stretch of the imagination, as Facebook CEO Mark Zuckerberg continues to shoot for the moon with his $2 billion virtual reality business. Facebook VR includes a partnership with Microsoft (MSFT) to incorporate the Oculus Rift platform into the Xbox One gaming console, extending the reach of FB stock even further into consumer technology.
There’s plenty more to like, too, including experiments with a “buy” button on advertisements or efforts to plug publishers directly into Facebook’s platform instead of simply linking out to other websites.
But here’s the bottom line: If you’re wondering if FB stock has what it takes to power higher, the answer is a resounding “yes” based on recent headlines.
Check out John’s in-depth commentary in the associated FB stock video below!
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
