Facebook (NASDAQ:FB) and its founder and CEO, Mark Zuckerburg, are posterchildren for the hero-to-zero persona. For years, Zuckerburg was viewed as the man who connected the world through social media. And he created trillions of dollars in value for companies related to the social media space.
But today that same man is viewed as the villain who introduced the world to social media and created the online monster that is Facebook.
I have to say … I never loved Facebook, but I don’t loathe it either. Aside from Twitter, I’m just not a big fan of social media. In fact, I have deleted both my Facebook and Instagram (which is owned by Facebook) accounts.
All that said, I am not ready to press the hypothetical delete button on FB stock just yet. However, I am also not ready to proclaim that the $123.02 low hit in December was the stock’s ultimate bottom.
Whether it was or wasn’t, I strongly believe that Facebook is a good value in the $120-$145 area for long-term investors.
Adding It All Up in FB Stock
Let’s dive into the company’s numbers. Facebook reported revenue of $40.7 billion in 2017, and that is expected to increase to $55.4 billion when full-year 2018 results are released later this month. That represents impressive sales growth of 36.4%. Looking ahead to 2019, revenue is estimated to grow another 24.4% to $68.9 billion.
That doesn’t sound like a company that’s in a lot of trouble.
From a valuation standpoint, FB trades with a PEG ratio of 1.09 and a forward P/E ratio of 19.4. Both are close to the lowest levels ever for this company — aside from when it was trading at its December low.
Earnings per share will only show a small increase in 2019 after experiencing high annual growth since the company went public. However, growth should pick back up in 2020 and beyond.
Put it all together and the numbers suggest a stock that is undervalued but could take a couple of years to get back to its full valuation.
Finally, there’s one non-quantitative catalyst that’s worth mentioning. Businesses still rely heavily on Facebook for advertising, and I don’t expect this to change at any point in the coming years. That means the company should continue to see revenue growth of more than 20% for at least the next five years, which will ultimately lead to a higher stock price for FB.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.