Facebook (FB) unveiled plans on Thursday to deliver live video streaming and photo collage capabilities to all its users. The question is: Will it be able to move the needle for FB stock?
That will be hard to do, considering Facebook stock is already up 34% this year, 120% in the last two years, and is trading near all-time highs. Still, the latest changes at Facebook aren’t small potatoes.
The live video streaming feature, aptly dubbed “Live,” will allow users to share live video with their friends on Facebook. It’s currently being tested on a small percentage of people who own Apple (AAPL) iPhones.
Facebook Collages are the other new feature. They allow users to create and share collages by stacking tiles of multiple photos and videos. Facebook Collages will be available on iOS starting today, and Android phones sometime next year.
New FB Products Already Priced In?
The new features sound cool, and should only enhance Facebook’s appeal, though I doubt they’ll result in a cash windfall overnight the way a new iPhone does for Apple. FB already owns the photo- and video-sharing application Instagram, and that has yet to be a significant moneymaker for Facebook stock. And it may take a while for “Live” to achieve the same widespread appeal of Instagram.
But Facebook’s video appeal is undeniably growing: Last quarter, FB users watched an average of 8 billion videos per day — double the 4 billion per day reported in April. And Live is clearly a shot across the bow of Twitter (TWTR), which launched a video app called Periscope back in March.
Investors haven’t seemed swayed by Facebook Collages and Live yet. Perhaps they were already priced into FB stock after advancing 20% in the last two months.
Perahps. But even if it does take a while for the new video streaming and collage features to affect Facebook’s top and bottom lines, there’s already plenty to like in that regard.
FB Stock Sitting on Solid Financials
Facebook’s revenues continue to grow at a very healthy clip, up 40% in the third quarter and on track for a 40% full-year improvement over 2014. More encouraging: Mobile ad sales now account for 78% of that revenue, up from 66% a year ago.
Earnings growth also returned last quarter after a couple of down quarters. For the year, FB’s earnings per share are expected to reach $2.17, up 22.5% from $1.77 last year.
The number of active Facebook users is also on the rise: monthly active users climbed 14% in the third quarter, while daily active users topped 1 billion for the first time, a 17% improvement from a year ago. Think about that for a second: One seventh of the planet uses Facebook on a daily basis!
Trading at 36.5 times 2016 earnings estimates, FB stock is a bit pricey after its recent run. But then, Facebook stock has always been pricey. That only seemed to matter in its first year as a public company, before Wall Street was wooed by the company’s superior growth.
A financial estimates expert told CNBC recently that Facebook would have to maintain revenue growth of at least 32% to 33% to warrant its current multiple. Considering the company hasn’t had a single quarter of less than 39% sales growth since going public in 2012, that seems like a pretty safe bet, at least for the foreseeable future.
Live, Collages Keep FB Feeling Fresh
The fancy new products FB unveiled yesterday keep the social network feeling fresh and cutting-edge, and really, that’s the most important thing right now. Given the sales and earnings growth, the only thing that could prompt investors to sour on FB stock is if the company started to suddenly feel stale.
Instead, Facebook Collages and Facebook Live have the social network looking riper than ever.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
