Social media giant Facebook Inc (NASDAQ:FB) has already had a pretty good year with FB shares gaining nearly 19% over the course of just two months. While March is unlikely to hold any major events for Facebook stock, shares of the advertising firm are worth holding onto as the company still has quite a bit of growth ahead of it.
Since the firm’s IPO in 2012, FB stock has appreciated considerably and the company itself has grown exponentially.
Investors who were able to ride out the Facebook stock’s initial bumpy ride saw their shares gain steadily from 2013 on. With FB stock currently trading at $136.7 per share, many are wondering if the company will be able to keep growing and delivering such impressive returns.
After all, the firm makes the majority of its money from advertising and CEO Mark Zuckerberg has admitted that the firm has reached its saturation point in terms of ad volume.
The Foundation of FB Stock’s Long-Term Potential
So that leaves gaining new users as a way to bring in new revenue. However, Facebook’s most recent earnings report showed that daily active users jumped up from 1 billion to 1.23 billion over the past year. How many more users can FB accumulate?
The answer is that Facebook could essentially double that figure — especially considering that the site is the most popular social media service around the globe. If you consider the fact that around half of the world’s population has access to the internet, that means FB’s target market is around 3.5 billion people. There are still many people who can be roped into the Facebook ecosystem, meaning there are still potential growth avenues for FB stock in the future.
Growing just by sheer numbers isn’t the only way for Facebook stock to beef up its bottom line. The company can draw in more advertising dollars as it improves its offerings and increases engagement among the users that it has already obtained. On the bright side, FB has plenty of interesting features in the pipeline for both Instagram and its primary platform that will do just that.
For example, video is one of the areas that offers a lot of potential for Facebook. The firm recently hired Mina Lefevre, who used to lead scripted development at Viacom, Inc. (NASDAQ:VIA, NASDAQ:VIAB), which is expected to help the company move forward in this space.
FB is likely to develop its video platform significantly in the year to come. Many believe that the company is looking to expand its video offerings to compete with Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube; and judging by YouTube’s advertising success, that would be a boon for Facebook stock.
Beyond video, Facebook has another avenue by which to grow its advertising revenue: messaging. Between WhatsApp and its own Messenger, FB currently owns the two most popular messaging services in the world. What’s more, Facebook has done very little so far to monetize those services. This year, we will likely see the company’s plans for its messaging services take shape, which will likely provide a catalyst for FB stock.
The Bottom Line on Facebook Stock
Facebook stock is certainly not cheap, but the company hasn’t reached its plateau just yet. The company has conquered social media and it has proven that it has staying power, but the question now is whether the firm can continue to grow its ad revenue now that the social media site has reached its limit as far as ad volume.
While there are still some questions as to how FB stock will move forward, the firm has a solid plan for the future and enough growth potential to justify a long position.
As of this writing, Laura Hoy was long FB.
