If there is one company whose growth rate other companies are trying hard to match, it is Facebook (FB, Financial). With huge amounts of free cash flow, Facebook has been widely regarded as the “best of best stocks” to buy. Facebook witnesses close to 1.35 billion active users per month and close to 860 million active users per day. Earnings have been always been on a constant increasing trend and all these have made Facebook one of the must-have stocks for 2015 at least, if you have not bought them already. Here are some of the top reasons why you should invest in Facebook.
Alarming growth rate
Facebook is the market leader in the social networking industry. With its current growth rate, it is all set to become the world’s first trillion-dollar company. When compared to all other companies that have a minimum market capitalization of $100 billion, Facebook is the best when it comes to rate of growth. In 2012, when the company launched its initial public offering, things were not rosy. The IPO didn’t work out as expected, and the share prices plummeted to a new low of $17.55 per share. Experts and trade analysts anticipated that Facebook would take a long time to bounce back. However, they were proved wrong. Within two years, the share price shot up to a new high of $82.17 per share. This made the stock one of the best in the world. With this kind of growth, it is quite obvious that Facebook is a stock that any investor would love to hold. This is the share price trend of Facebook for Q1, Q2, Q3 and Q4 of 2014 and Q1 of 2015.
Attractive valuations
All the investment rating agencies have predicted that Facebook would do exceedingly well in 2015 and 2016. Currently the share price of Facebook is $76.25 per share. As per recent valuations by investment research analysts across various firms, this is expected to go up to $91 per share in the coming year. Hence they recommend investors buy this share at the earliest, before the prices start shooting up. Facebook will benefit hugely from the income from advertisements, Instagram and video applications. Revenue and earnings per share forecasts too are quite bullish for Facebook. Estimates for revenues for 2015 and 2016 are $16.85 billion and $22.36 billion, respectively. The forecasts of earnings per share for 2015 and 2016 are $1.96 and $2.55, respectively.
Smart acquisitions
Facebook has been making the right moves when it comes to acquisitions. During August 2012, it spent only $1billion to buy Instagram. Today, Instagram is a huge asset for Facebook and one of the largest revenue contributors. Experts are of the opinion that, by the first half of 2015, Instagram would generate at least $2.7 billion worth of revenue, and revenue by the end of the next four years was estimated to be $4 billion. Recently, Facebook spent $19 billion to acquire WhatsApp, a chat messenger app.
Facebook, headed by a smart and astute Mark Zuckerberg, understood the potential of Instagram and WhatsApp as lots of people were using these applications. Since the customer base was already there, Facebook had to only shell out money to bring these applications under its control, which it rightly did. Facebook has also acquired the relatively lesser known virtual reality company known as Oculus VR.
Zuckerberg is sure that he has put his money on the right horse as the company is expected to attract lots of customers in the near future. With these acquisitions, Facebook is currently on the right path in its mission of growth and diversification.
Conclusion
With the share prices of Facebook increasing considerably with every passing day and with the Price-to-Earnings ratio expected to come down next year, investors should act immediately and buy Facebook stocks at the earliest, before they get too costly. With Facebook stock in your kitty, you can be assured of great returns on your investment, year after year.
