Stock (Symbol)

Facebook (FB)

Stock Price

$101

Sector

Technology

Data is as of

February 11, 2016

Expected to Report

Apr 20 – Apr 25

Company Description

Facebook, Inc. is a social networking company. The Company is engaged in developing products that enables users to connect and share through mobile devices and personal computers. It offers various services focused on people, marketers and developers. It offers various platforms for people to share their opinions, ideas, photos and videos, and to engage in other activities. Its products include Facebook, Instagram, Messenger and WhatsApp. The Facebook mobile app and Website enables people to connect, share, discover and communicate with each other on mobile devices and personal computers. Its Messenger is a mobile-to-mobile messaging application available on iOS and Android phones. Instagram is a mobile application and Website that enables people to take photos or videos, and share them with friends and followers. WhatsApp Messenger is a cross-platform mobile messaging application and allows people to exchange messages on iOS, Android, BlackBerry, Windows Phone and Nokia devices. Source: Thomson Financial

Sharek’s Take

Facebook is doing fabulously well. Last qtr the social network had 52% revenue growth — up big from 41% growth 2 qtrs ago — and sales would have grown an amazing 60% if it weren’t for foreign exchange. Profit growth was 46% last qtr and analysts predict 48% and 44% growth the next 2 qtrs. My Fair Value is a reasonable 45x earnings, which is a $142 stock this year and $186 in 2017. Plus, the company continues to execute so well that annual estimates have increased in each of the last 4 qtrs, with 2016’s profit estimates going from $2.61 top $3.15. What will the company eventually make this year? 4? A P/E of 45 would be a $180 stock. Facebook now has new large ads for cell phones and tablets, advertisers are flocking to Instagram, and FB can utilize WhatsApp later on for future growth. After the company reported profits the stock broke out and looked to be making a run, but was caught in a vicious stock market correction, and came back down. Now that the market is in rally mode I expect the stock to make up for lost ground. Facebook is like a big freight train steamrolling ahead, and the stock is head-and-shoulders above the other stocks on the market. FB continues to be my top pick for 2016.

One Year Chart

This one-year chart was done earlier this month, and since then the stock has tip-toed higher to $108. Last qtr analysts predicted 24% profit growth and Facebook crushed it with 46% growth. Estimates also jumped after the fabulous results. The Est. LTG of 32% a year is superb and the P/E of 32 is remarkably low considering how rapidly FB is growing.

Fair Value

To me this stock is extremely undervalued, and this can be blamed on the wicked stock market correction we have had during January and February of this year. Since profit estimates have been increasing, its conceivable this stock could double by next year.

Bottom Line

Facebook has had picturesque growth since it added advertisements to people’s News Feed. The company continues to make state of the art improvements and inhale advertising dollars to the point others question whether its worth it to advertise anywhere else. Facebook is not only in rapid growth mode, but the stock is also selling at a deep discount to my Fair Value. This is my largest holding and holds the top spot in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.

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