Facebook Inc: Buying FB Stock Is Just a Matter of When
There’s no denying it. Facebook Inc (FB) stock has been one of the best investments anyone could have made since its early 2012 IPO … and that’s factoring in the post-IPO stumble that stemmed from the then-controversial (though now largely forgotten) possibility that the company overstated its growth potential.
Facebook stock is currently up 550% from its late-2012 lows, but is also up a healthy 200% from its IPO price of $38 per share. There’s not a lot complain about no matter where you got in.
However, the $64,000 question is, can the Facebook stock price continue to climb at its impressive pace, and if so, how long?
Answers (in order): Yes, and longer than you might think.
A Bullish Undertow for Facebook Stock
While this is mostly going to be a technical look at FB, not even a mostly-technical look at Facebook stock is complete without the context of the company’s amazing growth that has silenced even the most persistent critics. Although the company’s fiscal results don’t prevent the usual choppiness all high-profile stocks tend to dole out, the longer-term uptrend is merely a reflection of — and will continue to be a reflection of — the company’s corporate numbers.
Just to paint the picture in finer detail, Facebook has beefed up its top line from $3.7 billion in 2012 to $17.9 billion last year. Analysts expect to see similar growth going forward, with annual revenue reaching $52.4 billion in 2019. Per-share profits for FB rolled in at 53 cents in 2012, but reached $2.28 last year. Those same pros expect to see earnings of $7.08 per share of Facebook stock in 2019.
That’s a lot of growth, but it’s not an over-the-top outlook. Even with as much growth as Facebook has mustered thus far, the fact of the matter is, most people on the planet are not yet Facebook members. Only 1.59 billion individuals were regular users as of the end of 2015, versus a global population of 7.4 billion. Never even mind the fact that Facebook arguably knows how to monetize its users better than any other membership-oriented web-based company.
In other words, there’s no reason to think the bigger-picture bullish undertow for Facebook stock won’t be around for a long while.
Buy FB on the Dips
In light of the ascending top and bottom lines (past and future), it’s not hard to plot the bullish trend lines that have guided Facebook stock higher since late-2013. There are a few of them, actually, all plotted as dashed lines on the chart below.
The real hero since the middle of 2013, however, has been the 200-day moving average line (green). Once FB cleared it in the first half of that year, that long-term moving average line has rekindled the long-term rally every time it was tested as a floor. In fact, the 200-day average line is the key reason the current intermediate-term rally is underway. There’s some room to keep rising before either of the upper trend lines are met.
At this moment in time, while the short-term momentum is bullish — with plenty of room to keep rising before a ceiling is hit — it’s a flawed bullishness that merits at least a little short-term concern.