Social media icon Facebook Inc (NASDAQ:FB) has been a market darling for the last four years, but if you thought FB stock had reached it’s peak — think again. Not only has Facebook proven that its social media platform has staying power, the company’s dominance in advertising and potential growth opportunities make it a great addition to your portfolio. If there is one stock that’s worth hanging onto in 2017, Facebook stock would be it.
Last year, questions about whether Facebook would be able to keep the public’s attention as new social media sites gained popularity weighed on investor sentiment.
Snapchat was one such competitive threat because the platform’s offering was unique — send a photo or message that is erased seconds after it has been seen. This concept answered millennials’ calls for a platform that allowed them to share pictures but also protect their privacy.
However, FB proved that it could also fill that gap by adding ‘stories’, an almost clone of Snapchat’s offering, to its Instagram platform. Facebook proved that first isn’t always best when Instagram Stories became nearly an overnight success. It took FB just five months to amass 150 million active users compared to the six years Snapchat needed to gain the same number of users.
Now, Facebook is rolling out live video streaming on its platform, a function that will compete with Twitter Inc’s (NYSE:TWTR) similar offering. The live-streaming option is still in the early stages of a rollout, but my guess is that FB will be able to outdo Twitter in just a few months as well.
FB: The Advertising Goliath
Perhaps the most valuable thing about Facebook is its user base. This is true for all social media companies, but FB’s 1.79 billion monthly active users are not only online constantly, but they are easy to profile because they share and interact with things they like — all things that Facebook is capable of tracking.
This allows FB to sell advertising space at a premium, because the firm can guarantee that a company’s ads will be seen by someone who is interested in whatever that company is promoting.
Not only does Facebook stock boast a network, which far surpasses that of any of its competitors, but the firm also carefully tracks user data and keeps it readily available for advertisers. This is important because advertisers want to know how their customers behave in order to better serve them.
Another reason I like FB stock so much is that the company is always working to set itself up for the future, and that makes it a solid long-term buy. One of the areas that holds the most potential for Facebook is communication. Between its own Messenger service and WhatsApp, Facebook has control of the two most popular messaging services in the world.
That’s a pretty big deal, especially as smartphones have pushed the public to prefer texting over calling. FB has yet to bring in any revenue through WhatsApp, but the service is seen evolving to become a way for people to get in touch with brands and businesses, which can in-turn advertise to their WhatsApp contacts. This could be a huge money maker for Facebook stock as businesses look for new ways to engage with their customers.
The Bottom Line on FB Stock
Facebook has been delivering gains to investors for years, and there’s no reason to believe the ride is over yet. FB stock has further to rise in the coming year as its messaging services evolve and its social media platforms gain momentum. The firm has proven that it can effectively deal with competition and its focus on the future makes it a good play for long-term investors.
As of this writing, Laura Hoy was long FB.