Despite the fact that Facebook (FB, Financial) is hovering near all-time highs, I think the stock can still move higher as long as the company carries on reporting strong growth. Although investors should expect less upside from these levels considering the company's market cap has crossed the $360 billion mark, the stock is still a good buy.
Monthly Active Users Are Growing at a Healthy Rate
Facebook has prolonged its reach into new platforms like Messenger, Instagram and WhatsApp, and the company is accomplishing huge scale in those segments. Presently, Instagram has more than 500 Ă‚ MAUs and 300 million daily active accounts, whereas WhatsApp and Messenger individually have more than 1 billion registered accounts.
As a matter of fact, a majority of the growth opportunities in this specific industry are presently arriving from smartphones and the company is swiftly appealing to new users. Currently, Facebook has around 1.57 billion MAUs on mobile devices, escalating by 20% year over year throughout the second quarter.
The company has 1.57 billion monthly users on mobile devices, growing by 20% year over year during the second quarter.
Growth Outlook in the VR Market
The virtual reality market is growing at a rapid rate and Facebook accounts for one of the most significant companies in the VR market. The company acquired Oculus VR for $2 billion two years ago and has since paved its way into the market.
After acquiring Oculus, the company launched the first high-end commercial headset based on virtual reality together with first virtual reality app ecosystem with Oculus Home. Most importantly, many analysts project that the company will sell approximately 3.6 million units of Oculus Rift this year.
However, for growth in the imminent year, the company is not dependent on the sales of Oculus Rift. In its place, the company is likely selling the headsets at proximate break-even levels to prompt sales of digital content via Oculus Home, where it holds a 30% cut of each sale.
As an outcome, with Rift and Samsung’s Gear VR owners tied to the VR apps ecosystem, Facebook could produce considerable app revenue, which it could not do throughout the smartphone generation devoid of a leading mobile operating system.
Currently, Facebook produces a majority of sales from ads, but Oculus Rift and Oculus Home are not expected to generate huge revenue for the company in the near term. However, in the imminent years, revenue generated from app could increase, and the company could tie its social network into VR.
Conclusion
Facebook can keep moving higher as long as the company continues reporting strong growth. As of now, Facebook’s growth still looks to be on the uptrend, which is why I think the stock is a great buy at current levels.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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