Facebook Inc (FB): Face the Facts and Invest in This Company

Chances are you, all of your friends, all of their friends, your co-workers, your parents, and even your grandparents have a Facebook Inc (NASDAQ:FB). It is arguably the most popular company in the United States and was easily the most anticipated IPO of 2012. As the S&P 500 has risen 7.26% in 2013 to its all-time high, Facebook Inc (NASDAQ:FB) has fallen 8.64%. I do not think it will continue to underperform the market and it is actually about to make a sharp run higher.

Facebook Inc (NASDAQ:FB)

The site

Facebook is the most popular and most widely used social network in the world. It is also the second most popular and visited website in the United States to Google. Facebook Inc (NASDAQ:FB) has grown at an incredible rate since being founded in 2004 and it could be because of the vision of its fearless leader, Mark Zuckerberg.

On the website, management has some very impressive statistics listed. Here are the most notable ones:

More than 1 billion active users as of December 2012

82% of monthly active users are outside of the United States and Canada

618 million daily active users

680 million monthly active users of mobile products

Adding 1 billion active users in just 9 years is almost impossible to imagine. Some companies have been around for over a century and have not been able to achieve this level of popularity. This is what makes Facebook a one-of-a-kind investment opportunity.

4th quarter financials

Fourth quarter 2012 results were released on Jan. 30 and the report gave a strong reading of the growth Facebook is experiencing.Take a look at the key statistics below.

Highlights (year-over-year comparison):

Revenue increased 40% to $1.585 billion

Advertising revenue rose 41% to $1.33 billion

Monthly active users grew 25% to 1.06 billion

Daily active users increased 28% to 618 million

As you can see, advertising makes up 84% of Facebook’s revenue. With over 1 billion monthly active users, I believe advertising revenue can grow to over $10 billion within the next 5 years. Keep an eye on this revenue stream because it will be the key to Facebook’s continued success.

Expected growth

Earnings are projected to rise slightly in 2013 before explosive growth in 2014 and 2015. Check out the current projections, which I believe are much too low for a company with as much power as Facebook Inc (NASDAQ:FB).

  • 2013: 7.6% growth
  • 2014: 36.8% growth
  • 2015: 33.3% growth

Stock snapshot

Before the market opened on April 1, Facebook Inc (NASDAQ:FB) was trading at $25.58. It was trading at a multiple of 44.87 based on 2013 earnings, but just 24.6 times 2015 earnings. For high growth companies like this, investors like myself are willing to pay higher multiples. I believe Facebook has the ability to increase earnings by over 15% for at least a decade, meaning the multiples will continue to shrink.