The overall technology sector has seen valuations climb back to pre-COVID levels as investors flock to what has performed well in recent years, regardless of the economic backdrop.
Companies like Facebook Inc. (NASDAQ:FB) have continued to perform well, as advertising spending has not slowed to the degree many thought it would through this pandemic.
The strong secular growth drivers supporting Facebook’s earnings have not been negatively impacted by the COVID-19 pandemic, and investors have accordingly flocked to these growth names for safety.
The growth story behind Facebook’s business model doesn’t require any explanation. Online advertising through social media channels is only likely to continue its parabolic shift higher. What has, however, been interesting is watching how the market has reacted to the late-March to early-April dip which saw broader stocks selloff.
Some companies have fully recovered since the March lows while others have lagged behind. I believe Facebook is one of the group of outperforming stocks due to the relative value of its stock.
The idea that growth stocks cannot exhibit value-like characteristics is an arcane way of looking at the markets. Many pundits posit that a stock can either be a value pick or growth pick.
However, I believe Facebook has characteristics of both right now.
Essentially, some growth is cheaper to acquire exposure to, making Facebook a prime example of a company that is a great "growth at a reasonable price option," especially when one considers the company’s valuation relative to is peers, many of whom now trade at multiples much higher than Facebook.
Invest wisely, my friends.
