Facebook Stock Review

In this article, let’s talk about the Facebook (FB) stock. I’ll try to be honest in my opinions and take a look at the numbers to back things up. 

Before we begin, here are some quick FB stock stats, Facebook trades on the NASDAQ stock exchange under the ticker symbol FB. At the time of writing this article, it trading just above $302 USD per share with a P/E ratio of 36.99. 

Facebook’s founder, chairman and CEO is Mr. Mark Zuckerberg. He still monopolizes the company and holds the maximum authority and weightage in the business decisions and voting power. 

Mark Zuckerberg owns or controls 88.1 percent of Facebook’s Class B shares, which each have 10 votes at the annual meeting – 3.98 billion votes overall.

There are only 2.4 billion Class A shares, which are the only shares investors like you and me can buy. This is the kind of control and power Mr. Zuckerberg has on the social media giant Facebook. It’s scary yes, but that’s what it is. 

FB to date has acquired 82 companies. The major and notable acquisitions include WhatsApp, Instagram and Oculus (VR). 

You can see the complete list of FB acquisitions till date by visiting this link – https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Facebook

Facebook Stock does not pay any dividends, and it hasn’t paid a dime in dividends to date. That means Facebook is a technology growth stock. Of course, it’s a blue-chip with the market cap it possesses. 

Facebook Stock – Fundamentals 

In this section of the article, let us quickly look at the FB stock fundamentals. 

  1. Current Stock Price: $302

  2. Current P/E: 36.99

  3. Market Cap: 861B

  4. 52 Week range of the stock: $137 – $304

  5. Average Volume: 25M Daily 

  6. Forward P/E: 28.41

  7. PEG Ratio (5 yr expected): 1.10

  8. Price/Sales (ttm): 11.58

Facebook

Facebook Stock – Price, Revenue and Earnings 

Before we begin, I want you to take a look at the FB stock’s chart for the past 5 years. 

Facebook stock

That’s excellent stock growth correct? Yes, it is. Impressive. 

Now, look at the below chart to know the annual returns generated by the FB Stock: 

Facebook stock

That’s the yearly returns of the Facebook stock since it started trading live. (or inception)

As you can see, there’s only one year where the stock has returned negative or in red, that too considering the beginning and ending price, or else I don’t think it would be negative.

Facebook’s growth story in terms of revenue generation and monetization of its platform has always been impressive to Wall Street even though its decelerating off-late.  The stock returns thus far have been excellent, to say the least! 

But, the growth steam seems to be running our pretty soon, in terms of the percentages. 

Facebook Revenue 

Below is Facebook’s revenue for the past 10 years: 

facebook stock revenue

 

While there is an exponential increase in the Trailing 12 months revenue and the Quarterly income, what really gets interesting is with the third chart. 

Just look at the YOY Quarterly Growth chart, it’s constantly on the decline since 2014.  In 2020, its almost dropping dead. 

This only means to say or predict that Facebook is not growing at the same pace it used to in maybe 2012 and earlier.

The possible reasons for this can be – lack of diversification or product revenue. Also, the platform is not liked by the masses because of the data scandals and issues. 

Facebook Advertising Revenue

Remember what we spoke about companies such as Apple or Microsoft? 

Now, these companies have a healthy recurring revenue in terms of services or products. Their product diversification is more and thus the revenue generated. Recurring revenue is always like gold. It keeps adding back to the balance sheet. 

Whereas with Facebook, 99% or almost all of its income comes from digital ads. This is the exact reason why I am a bit skeptical and hesitant in recommending the stock to the masses. 

Now don’t get me wrong, FB is a monopoly in its space (social media), but it’s just not diversified enough as Apple or Microsoft or even Amazon. The business model still lacks the cream, I feel. Its just half baked with lots of issues. 

Facebook Recent Quarter Revenue 

Now, let us quickly look at Facebook’s recent quarterly earnings. 

Look at the Revenue vs. Earnings report for the Facebook Stock: (Quarterly)

 

Revenue vs. Earnings: Facebook Stock (Annual) 

Facebook Stock: Total ESG Risk Score and Actuals vs. Estimates based on analysts target

Quick Comparisons

In this section let’s quickly compare the market returns of couple of the FAANG companies and stocks: 

1. Facebook vs. Apple 

Facebook vs Apple stock

2. Facebook vs. Google (Alphabet)

Facebook vs. Alphabet

3. Facebook vs. Microsoft 

Facebook vs. Microsoft

Conclusion

While Facebook is one of the best blue chips in the US market with amazing results in the past, I am personally not a huge fan of the stock.  

First, the company is not well diversified be it Instagram or WhatsApp (yet to be monetized). 

Second, Facebook mainly relies on the digital ad income to supplement its balance sheet. 

Third, the company is no longer loved by the masses and they are always in issues for the wrong reasons. 

I will definitely pick Apple, Microsoft or Amazon over the Facebook stock any day.  

Thanks for reading and let me know your comments below. 

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