As with the majority of large cap blue chip technology companies out there, Facebook Inc. (NASDAQ:FB) has experienced a rapid stock price recovery in recent months. investors who stuck with the company through the turmoil and those who bought the dip in March had a very nice win. Those who may have missed the rally may now wonder if Facebook is a stock with runway for further growth, and if now is a good entry point given all the economic and political uncertainty on the horizon.
Value investors, I argue, ought to be reminded that while Facebook’s valuation has certainly climbed out of anything resembling a "value" pick, given the company’s projected growth rate, its current valuation is not unreasonably high. At the time of writing, Facebook has a forward price to earnings ratio around 21-times, far better than the 30-plus times backwards-looking P/E ratio most may see on their screens initially. The technology company’s social media platform is ubiquitous, and its Instagram and Whatsapp businesses have only partially been monetized, providing for a significant amount of room for future earnings expansion.
Facebook’s management team has multiple levers to pull to bring in more earnings, and is largely in control of how quickly the company chooses to grow. Certain regulatory overhangs related to anti-trust issues remain, however with these concerns likely to be pushes aside in favour of jobs in the near-term, I think this stock looks attractive long-term.
Invest wisely, my friends.
