In just 13 years, social network Facebook (NASDAQ: FB) has ascended to become one of the largest publicly traded companies in the world, with a market cap of over $440 billion. Its stock has handily outperformed the broader stock market since its 2012 IPO.
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That said, Facebook's stock chart only tells what the company has already done, rather than providing information about what the market thinks it will do in the future. Here are a few of the most commonly used financial metrics for the social media heavyweight:
Data source: Yahoo! Finance. P/E = price-to-earnings ratio.
If you think you want to buy Facebook stock, you'll first need an online brokerage account that you can use to buy stocks. You'll also want to check out this Motley Fool guide on how to buy a stock. The 10-point guide starts with understanding how stocks make money and ends with following up on your investments. Then, before you decide to pull the trigger on buying Facebook stock, you need to understand the business and its long-term investing thesis. Read on for help with that.
Inside Facebook's meteoric rise
Though online social networks had existed for some time, Facebook was the first tech company to truly nail the implementation across a host of important aspects. Facebook's user interface easily beat those of then-rivals Friendster and MySpace. Moreover, timing also worked in the company's favor, emerging as the cool upstart as a generation of internet-savvy consumers came of age. The rise of the mobile internet and Facebook's wholehearted embrace of the medium only accelerated its stranglehold on the nascent sector.
The progress it achieved along the way is nothing short of incredible. Facebook's monthly average users (MAUs) have increased from 360 million at the end of 2009 to 1.9 billion as of its most recent earnings report. Unsurprisingly, sales and profits have soared alongside this boom in users. As just two data points, sales increased from $777 million in 2009 to $26.8 billion in 2016, and net income rose from $229 million to $10.2 billion over the same period.
As commendable as Facebook's product development has been in creating what is really a monopoly in social media, the company's acquisition strategy has been arguably just as, if not more, impressive. Facebook shelled out then-seemingly gaudy amounts for emerging competitors, including (just to name a few) $1 billion for Instagram in 2012, $16 billion for WhatsApp in 2014, and $2 billion for Oculus VR in 2014.
Fast-forward to today: Analysts project Instagram alone is worth between $25 billion and $35 billion on a stand-alone basis, and many of these technologies remain in the early stages of their expansions. It's clear that in many regards, Facebook is just getting started.
Image source: Facebook.
Facebook stock remains a buy
Investors looking at Facebook's more recent results might need to pinch themselves. The company's growth has been so exceptional -- as just one example, net income increased 177% in 2016 -- that it is certain to moderate somewhat in the coming years. However, even as it matures, Facebook still seems poised to grow at above-average rates well into the foreseeable future.
As just a few data points in that vein, Wall Street sees Facebook increasing its sales 39% this year and 28% next year. Similarly, earnings per share are projected to increase 16% in 2017 and 24% in 2018. More encouraging still, Facebook's earnings per share is expected to rise at an average annual rate of 25% over the next five years. Of course, this isn't the breakneck growth many investors are accustomed to seeing from Facebook, but it certainly should be enough to support continued share-price appreciation for the social network's stock.
Facebook also enjoys another long-term structural advantage that should support its continued business expansion: its management. Over the years, founder and CEO Mark Zuckerberg has proven to have an astute eye for talent, consistently recruiting A-players to help him build Facebook; Zuck is no slouch himself. This more qualitative aspect of Facebook is harder to apply a direct dollar value to, but it arguably matters more over the long term.
For these reasons and many more, Facebook remains a great stock to own for long-term buy-and-hold investors.
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