When I last weighed in on Facebook (NASDAQ:FB), I said, “The run is far from over. After a brief pullback, I strongly believe FB stock could rally to $250 by year’s end.” That was on Feb. 19, as Facebook stock traded at $216.11.
Nowadays, it’s up to $296.34 – far better than our target price of $250.
Long-term, I think we’re looking at the next $1 trillion stock around $340 a share.
Near-term, I believe the FB stock could move lower after becoming a bit overbought. At the moment, Facebook trades just above its upper Bollinger Band with RSI, MACD, and Williams’ %R all deep in overbought territory. Each time we’ve seen a similar set up going back to early 2019, the Facebook stock has pulled back.
That’s likely to happen again. In short, it may be best to wait to buy on the next pullback.
A Closer Look at Facebook Stock
Long-term, analysts see bigger upside, too. Cowen analysts for example just set a price target price of $330 on FB stock on the company’s exposure to a multi-billion-dollar e-commerce boom. After all, far more consumers are opting to shop online to avoid the public.
Even analysts at Wedbush will tell you consumers won’t go back to physical store shopping as they did before.
“I like the call quite a bit [but] I think actually you can trade further upside here in Facebook,” said Joule Financial President Quint Tatro. “I mean, it’s not an overly high MOMO stock really until today quite honestly. But I think this is on its way to the trillion-dollar market cap club.”
Ascent Wealth Partners’ Todd Gordon also says Facebook is still a strong company, as one of the “dominant players of social media spaces. Facebook is the go-to for small business advertising dollars. There’s really nowhere else to go.”
UBS analyst Eric Sheridan just assigned a price target of $330 a share from $242 on the heels of Facebook Shop, which will let users buy products.
The E-Commerce Boom Could Fuel Big Upside
Earlier this year, Facebook partnered with Shopify (NYSE:SHOP) to launch Facebook shops.
“Shopify powers more than one million businesses that are transforming the direct-to-consumer landscape and changing the way we shop. With Facebook Shops, we’re bringing the tech industry together to help entrepreneurs succeed at a critical time,” said Tobi Lütke, CEO of Shopify.
Lütke also went on to say that that the partnership would make it easier for people to become entrepreneurs.
Facebook also teamed up with BigCommerce Holdings (NASDAQ:BIGC) to launch a new feature on Instagram that would allow users to shop for products. Both could make Facebook a powerful force in e-commerce next to Amazon (NASDAQ:AMZN).
It’s Tough to Argue Against Facebook, Long-Term
Even with a Congressional antitrust investigation and advertising boycotts, nothing can stand in the way of Facebook’s growth. In late July 2020, the company posted second quarter net income of $5.18 billion, or $1.80 a share, as compared to $2.62 or 91 cents year over year.
Revenue was up to $18.69 billion from $16.89 billion year over year. Meanwhile, analysts were only looking for $1.39 EPS on sales of $17.34 billion. Better, Facebook now has 2.7 billion monthly users, which is above estimates for 2.63 billion.
“Facebook has more than nine million advertisers on the platform, and in the second quarter, the company’s top 100 advertisers amounted to 16% of its revenue, which is a lower percentage from a year ago,” CFO David Wehner said.
The Bottom Line on Facebook Stock
At the moment, shares of Facebook are severely overbought and could pull back, near-term. I’d also use any dips as a buying opportunity. Longer-term, Facebook could easily become a trillion dollar company with exposure to a growing audience, sizable momentum, and a multi-billion-dollar e-commerce boom.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.