Facebook (FB) announced its earnings Wednesday, which delivered beyond expectations.
And as we all know, analyst expectations, while not culled from witchcraft, can be a bit … subjective. It’s easy to see that over the years, as the majority of analysts failed to see the dot-com bubble bursting and did not heed the warning signs prior to the financial crisis.
So when analysts projected more than 25% earnings growth from last year’s third-quarter figures (especially given the global economic quagmire we’ve been in) it seemed like they were setting FB up for failure.
And then Facebook reported earnings up 32% year-over-year, monthly active users (now at 1.5 billion) up 14% and active daily users (1 billion now) up 17%. And out of those billion-and-a-half monthly users, 1.4 billion connected through mobile.
Which brings us to the other huge catalyst for FB stock.
FB Stock’s Driver of Growth Isn’t Social
And while a billion users is cool, what’s really cool is monetizing those billion users. Facebook struggled to do just that for a few years, but now it seems Mark Zuckerberg has found the winning formula, and it’s transforming the social network into much more than, well, a social network.
Facebook is now a legitimate competitor to traditional media outlets.
As cord-cutting picks up steam, more people are prowling for content online, and FB has been working very hard to make its site friendly to more than game invites and cat memes.
What we’re seeing is FB come of age. Traditional media, online content and social media are at the intersection of the surge in people making choices across all platforms. Broadly available bandwidth now makes commercials and all other forms of video possible for significantly more people than it did just three years ago.
This has been the real breakthrough for online content. Now you can stream content just as easily as you can watch TV.
And who is leading this newly developing trend? Facebook. The company has begun hosting videos in recent quarters and is seeing huge adoption rates, which translates into a significant source of advertising revenue as well as significant content potential.
Therefore, FB is becoming a real contender for traditional media advertising, and is even a threat to online content providers like Netflix (NFLX) and Amazon (AMZN).
To this point, digital display advertising increased nearly 30% from the year-ago quarter. Alphabet (GOOG, GOOGL) saw its digital advertising decrease. That means FB is taking some of Alphabet’s market share already.
In the most recent quarter, Facebook attracted more than 8 billion views (3 seconds or more) by 500 million people, up a whopping 100% since April.
And all this is without even mentioning the launch of its virtual reality headset Oculus Rift in early 2016, as 360-degree video becomes yet another boon for advertising dollars. Simply put, there’s a lot of growth still left in this company.
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.
