Why Is Facebook Stock Good To Hold?
Down from Q2, will Q3 be a success?
Q3 earnings reports have been posted for all the major internet companies. Facebook, like most other internet companies are following a pattern, strong earnings through better margins. Despite strong earnings, revenue growth is declining. Facebook stock price has benefitted the last few days, which can be attributed to over-performing bottom-line targets. Facebook beat out Wall Street’s bottom-line targets by a huge 20%, even with user growth and revenue growth declining.
The general consensus amongst investors is that Facebook stock has had a tough year. Starting in March, Facebook stock holders were focused on the Cambridge Analytica headlines and the fall in user growth. The Cambridge Analytica scandal has since faded away, although Facebook did lose users because of the news.
During the summer, Facebook stock price fell again once investors thought Capitol hill would put sanctions on tech companies. More recently, tech companies like Facebook took another stock price hit as the UK announced a “digital tax” that would be implemented over the next few years. Investors think that other countries will adopt the “digital tax”. Facebook stock news has not been positive in the last few months, which is not good for public perception.
Facebook Stock Analysis
Despite the headlines and challenges, FB stock has maintained strong earnings results, especially the bottom-line results. Despite strong results, the FB stock price continues to get cheaper. Peak levels for Facebook shares are around $220. FB shares have declined around 30% since July 2018.
It seems like Facebook is the most enticing FANG stock to buy at this moment in time. With a forward P/E of only 20x, Facebook is valued just above the rest of the market. This is an undervaluation, because Facebook has been posting strong earnings growth. Facebook’s net income has increased bu 31% year-to-date, which is significantly higher than the market average.
While Facebook’s growth isn’t as dramatic as past years, its daily user count is still billions. Because of Facebook’s prominence on the internet it is unlikely that the company will be anywhere in the next few decades. Facebook’s products like Messenger are a prime example of why the company isn’t going anywhere fast. Instagram (owned by Facebook), offers the company another source of revenue growth.
Once investors get over the current challenges with the company, normal trading will continue. The low P/E ratio is enough to get any investors attention. This means that in the next few months, Facebook stock price will increase once again, providing gains for investors who buy in early. This strong Q3 performance proves to be a good time to invest in the company, most analysts give NASDAQ:FB a “BUY RATING”.
In conclusion, investors have been too bullish with FB stock predictions, so despite missing analyst predictions it is not too concerning in terms of overall performance.
Facebook Q3 Results – 2018
Revenue grew by 33% to $13.73 billion, attributed to advertising growth. In Q2, revenue growth was 42%. Wall Street predictions for revenue was $13.77, which Facebook did not hit. In Q2, Facebook share price dropped 20% during earnings call, as David Wehner, Facebook’s CFO, announced that Facebook would see revenue growth decline in Q3. This means that the Q3 revenue growth decline was expected.
Facebook Stock Prediction
Our analyst gives Facebook stock a monthly target of $194.40
Our analyst gives Facebook stock a “BUY” rating currently
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