It’s time to breakdown another social media giant. Here is the breakdown on $FB, otherwise known as Facebook.
Current Price: $283.23
52/Wk High: $304.67
52/Wk Low: $137.10
Market Cap: $797.9 billion
Read below for the breakdown!
Facebook is a major software and IT company that owns and operates some of the largest social media platforms and products.
Several of Facebook’s core products include the Facebook social media platform, Instagram, WhatsApp, Messenger, and Oculus.
Lastly, the majority of Facebook’s business is within the advertising space amongst their vast array of products. In fact, a huge majority of the companies revenues are pearly advertisement revenues.
Taking a look at the stock price itself, Facebook stock can be broken down by sector. According to TREFIS (@trefis), 93.39% of Facebook’s stock price is based on the companies Core Facebook Advertising segment.
Furthermore, 1.0% of the stock price is based on Facebook’s Payment, Fees, and Oculus segment. Finally, 5.6% of the stock price is based on cash and or Net of Debt.
Given that Facebook reports earnings on the 29th, it is only right to take a look at the last reported quarter, Q2.
Facebook delivered a Q2 beat, reporting an EPS of $1.80 versus the analyst’s consensus estimate of $1.39.
Secondly, Facebook delivered solid Q2 revenues, reporting $18.7 billion in Q2 revenue, representing a strong 10.67% year-over-year gain.
Income also held steady in Q2. Facebook reported a solid Q2 Net Income of $5.178 billion along with a Q2 Operating Income of $5.963 billion.
When it comes to guidance, Facebook noted that Q3 growth should be similar to the second quarters growth results.
Moving into the balance sheet as of Q2 Facebook was well-positioned;
Total Debt: $472 million
Total Liabilities: $29.244 billion
Total Assets: $139.691 billion
Cash & Short Term Inv: $58.240 billion
Based on the balance sheet, Facebook is financially sound all around.
Given the solid numbers all around the analysts are quite bullish on Facebook. Currently, the mean price target sits at $302.50/share, representing a 6.22% gain.
Facebooks high price target sits at $335.00/share, representing a 17.63% gain, while the low price target is $195.00/share, representing a -31.53% loss.
The big money is just as bullish as the analysts. Currently, 78.76% of Facebook is owned by institutions. Top holders include The Vanguard Group, Fidelity Management and Research, and BlackRock Institutional Trust.
Facebook stock is also relatively fair when it comes to pricing given the current multiples the stock is trading at;
Price to Earnings: 35.35x
Price to Sales: 10.50x
Price to Book: 7.15x
Price to Cash Flow: 28.60x
Based on the multiples, Facebook is not in my opinion too overpriced to get into. While it does trade at a premium, it trades at a much smaller premium compared to many other names within the technology and software sector.
The charts are also flashing opportunities. Currently, the six-month MACD has rebuilt strong upward momentum and is currently running in an upward range from 4.17 to 2.38.
On another note, the six-month RSI sits at 59.93 along with a high CCI of 108.30. It is also important to note that Facebook currently trades just over 20 points from its highs.
In short, Facebook is an excellent long term pick given the expected growth of social media, the continued trends of e-commerce and advertising, and the overall solid long term technicals of the stock.
Although it is a great long-term pick, I urge caution in the short term given the level of uncertainty and volatility within the market.
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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.