Facebook Smashed Q1 Earnings. Why $400 Is the Next Stop for FB Stock.

What Happened to the FB Stock Price Today?

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  • Facebook (NASDAQ:FB) stock popped more than 5% after the internet giant reported first-quarter numbers, which breezed past expectations and which included strong commentary about the underlying growth trends of FB stock as the broader economy normalizes.

Why It Happened

  • Facebook’s numbers were great.
  • The user numbers were good. Both DAUs and MAUs rose ~2% sequentially, consistent with the multi-year trend of ~2% growth every quarter. This durable user growth speaks to the underlying stickiness of the Facebook ecosystem, which — despite rising competition — continues to attract and retain users.
  • ARPU rose 34% year-over-year, the best ARPU growth rate since 2016. Clearly, the economy is rebounding, advertisers are re-upping spend, and Facebook is benefitting as a result.
  • Revenues surged 48% higher, the best revenue growth rate since 2018.
  • Operating margins expanded an impressive 10 percentage points, paced by work-from-home related savings and strong topline performance.
  • The company is firing on all cylinders as the world gets back to normal. No wonder FB stock is surging.

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Does It Matter?

  • Interestingly enough, all the digital media companies — Facebook, Snap (NYSE:SNAP), Pinterest (NYSE:PINS), Spotify (NYSE:SPOT), etc — are reporting very strong revenue numbers thanks to rebounding ad spend.
  • But Spotify, Pinterest, and Snap have been stung by slowing user growth trends. Facebook has not. User growth slowed in the quarter. But there was no indication that this slowdown will accelerate into the second quarter, as was suggested on other company calls.
  • This resilience of Facebook usage even amid reopening-related headwinds underscores the stickiness of the Facebook platform. This isn’t just a “fun-to-use” digital media platform. For many, it’s a must-have digital tool.
  • With those user growth headwinds sidelines, FB stock is set to benefit exclusively from rebounding ad spend tailwinds in 2021.

FB Stock Price Forecast

  • Facebook stock is one of the cheapest digital media stocks in the market.
  • The other big three social media stocks — Snap, Pinterest, and Twitter (NYSE:TWTR) — trade at 70X or bigger forward earnings multiples.
  • FB stock trades at 30X forward earnings.
  • On a sales basis, FB stock trades at just 11X sales, versus a 14X or bigger sales multiple for all other social media stocks.
  • Growth does not account for this valuation discrepancy. Facebook just reported nearly 50% revenue growth in Q1.
  • As such, we do not believe this valuation discount should exist. We’ve long held the belief that FB stock is on track for $400. We maintain that belief, and further believe that FB stock could hit $400 as soon as this year.

Facebook stock is a great growth stock to buy and hold for the long haul. But the reality is that most of the money in this name has already been made. Everyone already has a Facebook account. Every investor is already long FB. The company already has a market cap of $900 billion.

So, while FB stock is a great long-term buy, it’s far from the best stock to buy if you’re looking to score 5X, 10X, or even 20X gains in the stock market.

If you’re looking for those kinds of gains, you have to look where no one else is looking — at small, emerging stocks with breakthrough technologies that could change the world, but which no one knows about or is talking about today.

Buying those small tech stocks today could be like buying FB stock a decade ago… before it soared hundreds of percent.

Identifying these breakout small tech stocks before anyone else — and scoring 10X or bigger gains — is my specialty. That’s my niche in the market. Finding small tech stocks with huge breakout potential first is how I picked names like Advanced Micro Devices (NASDAQ:AMD), Chegg (NASDAQ:CHGG), Tesla (NASDAQ:TSLA), NIO (NYSE:NIO), Plug Power (NASDAQ:PLUG), Shopify (NYSE:SHOP), Square (NYSE:SQ), and many more before most other folks even knew they existed — and scored bigger than 10X gains in all those names.

But these days, my focus is on a whole new set of emerging tech companies that have enormous long-term upside potential. The companies that will become the next AMD, or the Netflix, or the next Tesla, if you will.

To find out about this new class of potential 10X winners, click here to watch my Exponential Growth Summit.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.

Article printed from InvestorPlace Media, https://investorplace.com/hypergrowthinvesting/2021/04/fb-stock-facebook-smashed-q1-earnings/.

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