Facebook, The “F” in FAANG
Facebook (NASDAQ:FB) has been one of the leading technology companies in the world and inching close to becoming a trillion-dollar company. Facebook posted astounding numbers and posted it’s fastest revenue growth in more than two years.
Although Facebook (FB) needs to worry about Government antitrust cases and a more hostile political landscape, many analysts believe Facebook (FB) is going to get through current and future headwinds. Another worry for Facebook is the new Privacy measure for Apple that could potentially hurt it’s mobile advertisement business significantly in the coming months.
Small and medium businesses have faced a huge blow in 2020 during the pandemic, still the dependence of their business on Facebook’s advertising platform to reach prospective customers has seen the most demand. Facebook has been notorious for killing the competition but what it has done for itself is having some of the best social media and futuristic technology companies like Instagram, WhatsApp, Oculus VR, Giphy, Mapillary and FB also has stake in India’s mobile behemoth Jio Platform in it’s kitty.
Facebook’s competitive advantage
With market Cap of 733 billion and P/E of close to 25 Facebook is relatively a cheaper tech stock in the stock market. With an astounding profit margin of 34% on a huge revenue base of $86B the stock has strong EPS and sustainable EPS growth as well. With total cash of 62 billion dollars and total debt of $11 billion makes Facebook a debt free company that can grow inorganically. Facebook has acquired some of the social media giants like Instagram and WhatsApp which it is yet to monetize properly.
The current ratio of 5.05 makes the short-term financial position robust and help Facebook withstand the short-term headwinds. Though the stock has moved up by almost 70% from it’s march lows, the upside potential is still enormous.
This FAANG stock has a long growth runway and provides unique value to advertisers. Facebook has proved it’s mettle during an unprecedented pandemic situation and the huge cash pile sitting in its bank account is going to help Facebook in this unprecedented macro-economic crisis. Though the long-term story for Facebook remains intact the short-term headwinds should indicate a more cautious approach. More clarity on how it withstands the long antitrust battle would make things clearer in the future.