Facebook (NASDAQ:FB) is no stranger to controversy, but nothing seems to hold FB stock back in the longterm.
After the Cambridge Analytica issue, a hacker breached the site, compromising 50 million user accounts. In April 2019, Facebook app developers left hundreds of millions of user records exposed on cloud servers. In December 2019, the company reportedly made changes that exposed 267 million users’ data, as I’ve reported.
However, none of that has stopped FB stock from becoming one of the most rewarding stocks on the market. Just over the last year, shares of the social media giant exploded from a low of $128.56 to a current price of $214.18.
The best part is that the run is far from over.
After a brief pullback, I strongly believe FB stock could rally to $250 by year end.
Don’t Get too Caught up in the Negatives
While FB had solid fourth quarter and full-year earnings, the stock did pullback following the report. All thanks to its slowing growth, which management knew would happen.
As CFO Dave Wehner said on a conference call, “We continue to expect a more pronounced deceleration of our revenue growth rate in Q4. We expect our Q4 reported revenue growth rate will decelerate by mid to high single-digit percentage compared to our Q3 rate.”
Still, there are plenty of reasons to be bullish on the stock.
FB Still Seeing Monumental User Growth
At the moment, Facebook has a global user base of 2.5 billion people around the world, up 2% from 2.45 billion in the third quarter of 2019.
It has 1.66 billion users, up 2.4% from 1.62 billion quarter over quarter. Even Facebook-owned messaging app, WhatsApp is now up to two billion users.
In short, it’s had no problem growing its base. Granted, Facebook did lose some users over the last two years on security concerns, but it appears the pullback was temporary. A recent survey from 5W Public Relations suggests that lull was temporary.
The PR firm claims that 77% of 18-to-34-year-olds still use Facebook on a daily basis, compared to 70% on Instagram,” noted Motley Fool contributor Leo Sun, suggesting “that fears about millennials abandoning Facebook were overblown.”
What it is struggling with are higher expenses, which grew to $12.2 billion in the fourth quarter of 2019 (34% year over year). Still, it’s tough to ignore the fact that Facebook is still one of the most influential companies of our time.
Facebook is also monetizing its private messaging apps, testing direct ads and click-to-messaging ads in programs (WhatsApp and Messenger) that have more than a billion users. Facebook is also pushing in an explosive, multi-billion-dollar world of eCommerce, with programs such as Instagram Checkout and Facebook Pay.
Analysts Say Facebook Stock Has More Upside
Pivotal Research analyst Michael Levine recently lowered his rating on FB stock to a hold from a buy, trimming his target to $215 from $245. He argues business has slowed more than expected, and that the issue will likely persist.
“Taking the company at face value, it is hard not to see a healthy deceleration in the U.S.,” he said.
However, Levine is one of few pessimists.
Oppenheimer analyst Jason Helfstein has an outperform rating on the stock, boosting his price target to $265 from $240. He argues that user growth and engagement remain strong. Atlantic Equities’ analyst James Cordwell is also keeping an outperform rating on the stock with a $235 price target.
“The company remains well positioned to capture a significant share of incremental ad dollars and overall growth remains strong, while conservative cost guidance means there should be upside,” to 2020 and 2021 estimates, he noted.
Raymond James analyst Aaron Kessler upgraded FB stock to a strong buy with a target of $270. He argues FB offers “solid though decelerating growth.”
The Bottom Line on FB Stock
Controversy and decelerating growth aside, it’s tough to argue against the long-term opportunity in Facebook. With user growth still explosive, coupled with FB’s move to monetize its apps, I believe the long-term growth story is intact and strong.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.