By 2049, Facebook Inc’s (NASDAQ:FB) Mark Zuckerberg will reach 65 and the world will certainly be a much different place. Maybe apps will be implanted in our brains? Or perhaps we will live among androids? Thinking about such things is both thrilling and kind of scary too, but for those at InvestorPlace.com, the big question is: Will Facebook stock still be around?
Many top-notch tech companies have eventually fizzled. Just look at Nokia Corp (ADR) (NYSE:NOK), BlackBerry Ltd (NASDAQ:BBRY), Yahoo! Inc. (NASDAQ:YHOO) and AOL. Not long ago, all of these companies seemed invincible.
But with FB stock, I think there is a good chance that Zuckerberg will be able to keep up the momentum for the long haul. And if so, this should mean that Facebook stock would be a solid investment for your retirement.
So what are the key factors to back this up? Let’s take a look:
Facebook Stock Wins With Zuckberg’s Magic
When it comes to tech companies, it’s is absolutely critical to have a top-notch CEO. It’s hard to imagine Apple Inc. (NASDAQ:AAPL) without Steve Jobs or Microsoft Corporation (NASDAQ:MSFT) without Bill Gates or Amazon.com, Inc. (NASDAQ:AMZN) without Jeff Bezos.
Zuckerberg has already proven his leadership chops for FB. In the early years, he had the foresight to focus on social networking and taking a tough stand on certain issues (such as not crowding the site with ads or allowing fake accounts). The result was that Zuckerberg was able to fight off plenty of tough rivals, like MySpace.
But he also made bold moves to keep up the growth. Often this meant transformative acquisitions of companies like WhatsApp and Instagram.
However, some of Zuckerberg’s moves have not been about creating breakout technologies. He was smart to develop lightweight apps — that use low amounts of bandwidth — for emerging markets. It was a savvy way to pick up millions of new users and add more to Facebook stock.
Whenever Zuckerberg has faced tough challenges, he has found ways to prevail. A key example of this is what happened a few years ago, when FB was woefully lagging with mobile. But as of now, the company is the dominant player in the space.
FB Stock Is Positioned for Megatrends
The TV ratings for the Rio Olympics were certainly disappointing, down over 30% compared to the 2012 Summer Games in London. But as should be no surprise, there was a surge in video streaming. In fact, much of this was on the FB platform, where there were over 600 million video views.
Essentially, this is another case of how well the company has positioned itself for the dramatic changes in the consumption of media. The fact is that ad budgets are aggressively moving towards online video, social media and mobile.
The good news for FB is that the company has the scale and demographic databases to be effective for major brands. The platform gets a whopping 1.1 billion visitors every day. To put this into perspective, the 2016 Super Bowl garnered an audience of close to 112 million.
Facebook stock has certainly had a nice run, with a gain of 43% during the last 12 months. But the valuation is still not out-of-whack. Consider that the forward price-to-earnings multiple is about 24. By comparison, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) sports a multiple of 19X and MSFT trades at a similar valuation.
Facebook is growing at a much more rapid pace. When a dominant company is benefiting from major trends, the stock can continue to generate hefty returns for many years. This was the case with MSFT during the 1980’s and 1990’s, when the company led the PC revolution. FB stock is following MSFT’s footsteps in this regard.
FB Has Lots of Leverage
As companies get larger, it becomes more difficult to gin up the growth. But this has not been a problem with FB. During the first half of this year, revenues jumped by 56%, compared to the 40% increase in the same period a year ago.
So what is FB doing to pull this off? The company has a variety of assets, like Instagram and WhatsApp, which are still in the early phases of monetization.
What’s more, the opportunities could go well beyond selling ads. For example, with WhatsApp and Messenger, FB can leverage bots — micro apps — to allow for the purchase products. In other words, the company could ultimately get a hunk of the lucrative ecommerce market.
At the same time, FB is working on other cutting-edge technologies like artificial intelligence and virtual reality, which could prove to be critical markets for the long-term.
As Zuckerberg noted in the most recent earnings call, “We have a saying at Facebook that our journey is only 1% done. And while I’m happy with our progress, we have a lot more work to do to grow our community and connect the whole world. That means making big investments and taking risks, focusing not just on what Facebook is but on what it can be.”
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.