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Facebook Continues to Be the Top Stock in the Market

Stock (Symbol)

Facebook (FB)

Stock Price

$135

Sector
Technology
Data is as of
February 26, 2017
Expected to Report
Apr 25 – May 1
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
David SharekLast qtr Facebook (FB) informed investors of slowing growth ahead — and profit growth did slow last qtr, from 91% to 78%. Well if that’s slowing growth I’ll take it. The reason growth should slow is the Facebook app had been putting more ads into its newsfeed, and now that growth has to slow else users will become irritated. Still, there is great growth opportunity for ads on company owned Instagram and (eventually) WhatsApp. This stock sells for an unbelievable 25x earnings. Now with growth stocks in favor after a three year hiatus, FB has the ability to perhaps rise 50% this year and go to $200. My napkin analysis on $200 is using quick math of 33x earnings on $6 in profits which are both guesstimates on my part. FB has excellent fundamentals. It possesses rapid profit growth, has been beating the street, is upping profit estimates and is expected to continue to grow profits rapidly in the coming qtrs. But the kicker is the P/E of just 25 which makes the stock a steal in my eyes. With the Bull Market into its ninth year, some investors envision a top ahead. But experience has shown me stock market tops are often preceded by explosive moves higher with the top growth stocks of that time (1987, 2000, 2007). To me the signs points to continues success for this Facebook, which in my opinion is the best growth stock in the stock market.
One Year Chart
FB delivered 51% revenue growth last qtr with 78% profit growth which beat the 65% estimate. During the last 4 qtrs Facebook has beaten the street and upped estimates across the board. Although profit growth is expected to slow going forward, analysts have qtrly profit Estimates of 44%, 34%, 23% and 21% for the next 4 qtrs. These numbers are all climbing, thus I continue to believe 40% profit growth for 2017 is achievable. Analysts did take their Est. LTG down from 35% last qtr to 24% this qtr. The P/E of just 24 is really hard for me to fathom.
Fair Value
For the 2nd straight qtr I’m taking my Fair Value down — from 45x earnings to 40x and now 35x. Still, with estimates on the rise the Fair Value stays high. I find it strange FB had a 26 P/E last year, but that was the peak of the move higher in value stocks and now with growth stocks en vogue again I think we see a return to the norm with FB’s P/E rising to the mid-30s. I think this stock could double by 2018.
Bottom Line
Facebook has been on a steady move higher since it began putting ads into its newsfeed. One thing I wish to point out is profits have been growing faster than the stock, and that means the stock now has some catching up to do. With perfect fundamentals, Facebook continues to rank #1 in the Growth Portfolio and Aggressive Growth Portfolio and Conservative Growth Portfolio Power Rankings. This stock has the ability to rise 50% this year and 100% by the end of 2018.
Power Rankings
Growth Stock Portfolio

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Aggressive Growth Portfolio

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Conservative Stock Portfolio

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