Is this social media leader a buy?

It’s time to revisit a social media giant. Here is the break down of $FB, otherwise known as FaceBook.


Current Price: $351.89

52/Wk High: $358.14

52/Wk Low: $207.11


Market Cap: $997.8 Billion


Read below for the break down!


Facebook ($FB) is a major social media conglomerate that was founded in 2004 and has since grown to become one of the largest technology companies in the world.


With a combination of platforms and products such as Messenger, Instagram, WhatsApp, Oculus, Workplace, Portal, Novi, and more, FaceBook’s user base continues to expand significantly.


FaceBook is led by CEO, Founder, and Chairman Mark Zuckerburg, who founded the company in 2004. Other leadership members maintain prior experience from the likes of Google, Zynga, Mozilla, the US Government, and more.


As of Q1, FaceBook maintained over 60,000 employees, representing a 26% increase in employee count. Lastly, the company operates offices within over 80 cities globally.


In recent news, FaceBook beat the Federal Trade Commission’s and 48 State Attorney General’s lawsuits alleging that the company maintained a monopoly over the personal social networking markets.


The lawsuits that were leveled against FaceBook sought to break up the company and to divest its assets on the grounds that past acquisitions of Instagram and WhatsApp were examples of anticompetitive and monopoly defending actions.


A federal court recently dismissed the case, throwing out both lawsuits Monday.


“The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims — namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services,” the US District Court for the District of Columbia said.


FaceBook was upbeat about the court battle's result.


“We compete fairly every day to earn people’s time and attention and will continue to deliver great products for the people and businesses that use our services,” FaceBook said.


Digging into the numbers FaceBook beat Q1 2021 expectations with an EPS of $3.30, better than the analyst’s EPS consensus estimate of $2.37. On a year-over-year basis, EPS improved by 92.98%.



As for revenues, total Q1 2021 revenues landed at $26.171 billion, representing a significant 48% increase on a year-over-year basis. For reference, the Q1 2020 total revenues level was $17.737 billion.




Breaking down revenues, Advertising revenues totaled $25.439 billion, representing a steady 46% jump in advertising revenues on a year-over-year basis.


Rounding out revenues, Other revenues totaled $732 million, representing a 146% increase in other combined revenues. The “Other” segment consists of hardware device sales, such as Oculus, and net fees from developers within FaceBook’s payment structure.


Furthermore, income from operations improved significantly, jumping to $11.378 billion from a much lower $5.893 billion in Q1 of 2020. On a year-over-year basis, income from operations expanded by 93%.


Net income also improved, jumping from a lower $4.902 billion in 2020 to a much better $9.497 billion in Q1 of 2021. On a year-over-year basis, FaceBook’s net income improved by 94%.


Shifting into margins, FaceBook reported a Q1 2021 operating margin level of 43%, representing an improvement over the same time 2020 level of 33%. Also note, FaceBook currently maintains gross margins of 80.5%, close to double that of FAANG conglomerates.


Rounding out the quarter’s financials, the first quarter's total costs and expenses landed at $14.793 billion, representing a 25% increase in costs. Although, this is to be mostly expected given that it often takes money to make money.


Lastly, Free Cash Flow (FCF) improved to $7.819 billion, representing a significant improvement over the Q1 2020 FCF level of $7.343 billion.


Shifting into users, FaceBook reported 1.88 billion daily active users (DAUs), representing an increase of 8% year-over-year. As for monthly active users, FaceBook reported 2.85 billion MAUs throughout Q1, representing a stronger 10% increase year-over-year.




Finally, FaceBook’s average revenue per user (ARPU) increased on a year-over-year basis to $9.27 per user worldwide. The company also reported ARPU growth amongst all regional segments, including the United States and Canada.


Sifting through the balance sheet, the numbers are solid.


Total Debt: $527 Million


Total Liabilities: $29.866 Billion


Total Assets: $163.523 Billion


Cash & Short Term Inv: $64.219 Billion


On a valuation basis, FaceBook trades at a lower valuation compared to competitors.


Price to Earnings: 30.15x


Forward Price to Earnings: 23.15x


Price to Sales: 10.63x


Price to Book: 7.49x


Price to Cash Flow: 21.92x




Leadership has been quite effective.


Return on Equity: 28.24%


Return on Assets: 22.35%


Return on Invested Capital: 24.62%


Given the numbers the analysts are bullish with a mean price target of $386.61/share, representing a 9.87% upside.


The high price target is $460.00/share, representing a 30.72% gain, while the low price target is $275.00/share, representing a -21.85% downside.


The big money is quite involved with 78.25% of FaceBook being owned by institutions. Top holders include The Vanguard Group, Fidelity Management & Research, and BlackRock Institutional Trust.


On a technical basis, FaceBook is on the move. According to the six-month charts the MACD is moving with upside momentum within a tight range from 7.14 down to 5.89.


The six-month charts are also indicating an RSI of 66.42 and CCI of 211.47, both of which are on the high end.



Looking to the future, bears fear more government crackdowns and a user growth slowdown, while the bulls expect user growth to continue and for oculus products to exponentially improve.


In short, FaceBook ($FB) is the clear leader within the social media industry, boasting expanding revenues, a growing user base, a reliable management team, flourishing digital ecosystem, and much more.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.