Business As Usual For Facebook Stock
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Even as traditional industrial stocks start to outperform tech, stalwarts like Facebook (NASDAQ: FB) remain as attractive as ever. Having trading mostly sideways from August through February, shares of the social media platform have popped 15% in the past two weeks and are closing in on their all-time highs. A combination of solid internal and external factors are at play here and investors with cash on the sidelines could do worse than taking them into consideration this week.
For starters, we have this $800 billion company that's still managing to report revenue growth above 30% year on year whilst also smashing analyst expectations year in year out. That’s impressive by any measure but all the more so for a company of Facebook’s size and one that’s just come through the pandemic. A pandemic that if anything, they’re coming out of stronger than when they went in.
Their advertising business is not only back to pre-pandemic levels, but as of fresh data reported last week, is actually above them with expectations for it to keep increasing through the summer. The benchmark metric here is cost per thousand impressions (CPM) and Aisle Rocket's Jen Strojin says “projections are showing that CPMs will continue to increase – and we are not even in the holiday season yet, where we typically see the highest CPMs on Facebook”.
This optimistic outlook is shared by Deutsche Bank who increased their price target on Facebook shares yesterday, moving it from $355 to $385. Considering the stock’s all time high of $304 is within touching distance right now, Deutsche are obviously expecting big things with that implied upside of 30% from Monday’s closing price.
They’ve also increased their Q1 and full year estimates, pointing to "more confidence on the back of positive feedback from the ad community, multiple encouraging data sets on ad prices and spending trends, delays to Apple iOS privacy changes and positive recent commentary from Facebook’s CEO." In addition, investors have additional catalysts to look forward to in the form of "benefits from the largest round of stimulus checks to date, more tests of non-skippable Stories ads, and the potential for Facebook to start monetizing Reels."
With a price-to-earnings (P/E) ratio of 28, no one can call Facebook overvalued even with shares where they are. Indeed, as rates increase and tech stocks as a whole take a back seat for now, Facebook remains a shining light and aspiration for what many tech companies wish to be. With a much lower debt profile than even most of the rest of the FAANG group of stocks, Facebook is fairly well insulated from the higher rates that are causing other well-known tech names considerable pain.
As shares start to move off multi-month support and test the lower end of their multi-month resistance, it’s an interesting time to be considering a position. There’s no harm with an opening position at current prices and then adding to that if they clear $300 easily enough, and alternatively you could look for a final retest of support around the $260 mark before getting involved.
The weakness prevalent in tech over the past month has undoubtedly held Facebook shares back, as there’s just too much going for them right now to not be in a solid rally. But as the Nasdaq continues to consolidate after its correction and a higher rate environment continues to become the norm, fairly valued tech stocks like Facebook with solid momentum should continue to do well.
Facebook is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.