3 Reasons Why Facebook Inc (FB) Stock Is as Good as Gold

Facebook has the '3 P's' in plentiful supply. As long as that continues, FB stock will continue to head higher.

When a company like Facebook Inc (NASDAQ:FB) grows annual revenues to $27 billion, and when FB stock has reached a market cap of $345 billion in the span of 12 years … obviously hundreds of things have gone right.

But sometimes, simplicity pays off.

CNBC celebrity Marcus Lemonis’ hit show The Profit is one of my favorite business-related programs on TV; far more entertaining and informative, in my opinion, than ABC’s Shark Tank. Although his show deals with small business owners, his three-part evaluation methodology of people, product, and process is equally transferable to companies the size of Facebook or Lemonis’ own public company, Camping World Holdings Inc (NYSE:CWH).

Without all three of these parts being present in a business, you can be sure there’s going to be trouble. If Facebook stock continues to appreciate, it will be directly related to how well it meets all three of Lemonis’ key components of a successful business.

People? Check.

Fortune magazine recently named Facebook CEO Mark Zuckerberg its 2016 Businessperson of the Year. Zuckerberg — a college dropout, albeit an extremely smart one — knew very early on that he was in Facebook for the long haul, caring very little about an exit strategy or cashing out. He told Fortune’s Adam Lashinsky one year into Facebook’s existence, “I’m in this to build something cool, not to get bought.”

That’s pretty heady stuff for someone all of 21.

Zuckerberg’s combined the ability to think long-term, deliver a consistent message to his employees so they can execute on its growth plan, and remain patient while doing so makes him the ideal CEO.

Some of his best ideas come from interacting on a daily basis with an extremely talented group of managers, a slate that includes COO Sheryl Sandberg and Chief Product Officer Christopher Cox, who looks after Facebook’s core product. All five execs working with Zuckerberg in the C-suite have been with FB for at least eight years providing stability at the top which is a positive influence on the rest of the employees at the company.

How dedicated are Facebook’s people to it succeeding?

In 2015, the top four executives besides Zuckerberg had $175 million in Facebook stock and option awards vest in addition to their salaries, etc. It’s easy to stay motivated when you don’t have to worry about rent.

How well this trickles down to the rest of its 16,000 employees will have a big part in how high FB stock can go.

Knowing Zuckerberg, the rest of the team will do just fine.

Product? Check.

We all know about the core Facebook product, which definitely drives the company’s growth. But so many other products are helping Facebook conquer the world one user at a time.

Facebook’s latest business-focused product is Workplace, a private social network that companies can create that feels much like Facebook itself but is only for those working at the particular company signed up for Workplace. Detractors feel it’s not helping companies be more productive but rather wasting valuable employee time thereby reducing productivity. But Workplace is in its early days, so that’s yet to be proven.

In the meantime, here’s what enterprise social networks expert Carrie Basham Young says about Workplace:

“If you want to humanize the workforce, give power to your employees, and align teams up and down the chain to create strong webs of idea and information-sharing, then Facebook’s Workplace is the right solution.”

As for Instagram, WhatsApp, and Messenger, they had more than 2.5 billion monthly active users (MAUs) at the end of Q3 2016, 25% higher year-over-year. When you add to that the core product, which had 1.8 billion MAUs and grew 16% year-over-year, you’ve got a pretty good lineup of products.

Process? Check.

While Lemonis is speaking more about a company’s ability to operate efficiently, how a company operates as a group is equally important when it comes to corporate efficiency. If it’s constantly bogged down in internal corporate strife, productivity and purpose usually don’t exist.

Facebook is facing a media storm at the moment due to all the attention that has been given fake news stories and their effect on the election results. However, Facebook as a company values transparency in its business.

“I’ve heard people say escalating to your manager or someone else’s manager is political. A lot of people avoid escalating because they think they’re going to get in trouble with their direct manager or get someone else in trouble. That’s quite simply wrong,” Jay Parikh, Facebook’s global head of engineering and infrastructure, recently wrote in Harvard Business Review. “We make escalation “legal” by making sure people know they won’t be blamed or punished for speaking up or asking hard questions.”

Good companies try to avoid office politics.

Another part of avoiding office politics and creating a more enjoyable workplace is hiring talented people who want to build things, are good team players and don’t do a lot of whining.

Generally, those who don’t mind rolling up their sleeves and getting to work will do just fine at Facebook. Complainers simply won’t make it through the interview process.

Culture and fit are talked about a lot in business, but it’s clear Facebook walks the talk most of the time.

Bottom Line on FB Stock

Facebook has the 3 P’s in plentiful supply. If it continues to follow them, I don’t see why FB stock won’t continue to gain in value.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/11/why-facebook-inc-fb-stock-keep-climbing-iplace/.

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