Facebook Inc (NASDAQ:FB) saw an impressive amount of growth over the past five years. Since its rocky initial public offering in 2012, the FB stock price has risen almost tenfold from its September 2012 low of $17.55, after growing its revenue by an average of 50% per year over the previous five years.
Monday’s 4.5% drop in the stock’s price raised questions as to whether its growth story was winding down. Despite short-term reversals in the stock price, however, FB has plenty of innovations that can continue revenue growth for years to come.
A Meteoric Rise From Dorm Room to Boardroom
Nobody can question Facebook’s influence on social media. Since its founding in a Harvard dorm room in 2004, Facebook grew from a site available to students at select U.S. colleges to the world’s largest social media platform.
Today, Facebook has approximately two billion monthly active users. The world population is about 7.5 billion and an estimated one billion people live in the developed world. Hence, growth in subs is limited and FB stock’s path to growth lies in new social media categories.
FB stock has fared well against social media rivals. Twitter Inc (NYSE:TWTR) trades below its IPO price of four years ago. Even, Alphabet Inc (NASDAQ:GOOG) failed with Google Plus to lure away Facebook’s users. The only other social media stock that performed, LinkedIn, is now under the wing of Microsoft Corporation (NASDAQ:MSFT).
The acquisition game is one that Mark Zuckerberg & Co. know all too well. FB acquired WhatsApp in 2014, and the messaging app has grown to over one billion daily users. Facebook also acquired its former rival Instagram in 2012. Not surprisingly, FB chose to monetize its messaging services by making it another advertising platform.
Facebook also places ads on Instagram. Despite numbers exceeding 700 million users as of 2017, the company had done little in monetizing the platform. Today, Instagram serves as a growth engine of Facebook’s profitable advertising platforms. Although Facebook does not disclose Instagram’s revenue numbers, one analyst estimated Instagram’s 2017 revenue to come in at just under $4 billion.
This not only compares with archrival Snap Inc (NYSE:SNAP), parent of the Snapchat platform, it blows it out of the water. Snap earned roughly $885 million in 2017 revenue so far.
And Facebook has also moved into new ventures, specifically virtual reality (VR). The company acquired Oculus in 2014, and in 2017, the company released the Oculus Rift VR headset.
Bottom Line on FB Stock
The company plans to sell the device for as little as $200 and does not require attachment to a PC or smartphone. FB hopes the product will lead the VR trend in the same manner that Apple Inc. (NASDAQ:AAPL) led the smartphone.
Additionally, Facebook has released an enterprise edition called Facebook Workplace. Formerly known as Facebook at Work, it’s going into a new field called enterprise social networking (ESN). FB landed a huge client for this product by signing on Wal-Mart Stores Inc (NYSE:WMT).
ESN is a cloud-based communication tool designed for businesses of all sizes. In addition to communication, ESN also addresses workflow needs. International Data Corporation (IDC) expects the industry to grow at a 19.1% compound annual growth rate (CAGR). It’s expected to be a $3.5 billion industry by 2019.
Although a recent plateau in FB stock’s growth caused concern, plenty of options remain for revenue growth. Even though FB’s active user base exceeds the population of the developed world, room for growth remains.
Facebook made acquisitions in recent years of other social media platforms and technologies to expand social media use. Once these applications are fully monetized, the FB stock price should grow for years to come.
As of this writing, Will Healy did not own a position in any of the aforementioned securities.
