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Facebook Hits 52-Week High on Mobile Ads & Instagram Growth
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Shares of Facebook rallied to a new 52-week high of $210.46, eventually closing a tad lower at $209.99 on Jul 17. The rise in share price reflects a decent year-to-date return of about 19% against the industry’s decline of 0.7%.
This Zacks Rank #2 (Buy) company has a market cap of $602 billion and a long-term expected earnings growth rate of 24%.
The increase in share price can be attributed to the strength in its advertising business, mainly mobile advertising which is fuelled by growing user base and surging popularity of Instagram. Moreover, the company’s growing initiatives to secure its platform is also a tailwind.
Facebook Rides on Mobile Ad Growth
Facebook has been benefiting from its massive user base, increasing engagement levels and frequently updated applications such as Messenger, WhatsApp and Instagram. Per a recent report by Sensor Tower, Messenger, WhatsApp, Facebook and Instagram were the most downloaded apps on both iOS and Android in the first half of 2018.
We note that Instagram has emerged as an important cash cow for Facebook. The platform has doubled its user base over the last two years, crossing 1 billion monthly users recently.
Facebook’s huge user base of over 2.2 billion combined with that of Instagram makes it highly attractive to advertisers. Instagram has more than 2 million active advertisers. The Instagram Stories platform, which was opened to global advertisers in March 2017, is also gaining traction.
As stated in its last earnings conference, Facebook and Instagram have 80 million and 25 million business profiles respectively, of which, 6 million advertisers are on Facebook and the rest 2 million on Instagram.
The company is cashing on its strong user base by attracting advertising dollars, which grew 60% year over year to $10.7 billion (91% of total ad revenues) in the last reported quarter.
The company is leaving no stone unturned as it continues to bring features aimed at customer retention. Moreover, the company’s average price per ad growth to 39% is a positive given its advertising supported business.
AI Initiatives to Secure the Platform
Facebook has been taking various initiatives to keep its platform secure, especially after the data misuse allegations that surfaced mid-March. The company is investing in artificial intelligence (AI) to prevent false news, hate speech, suicide attempts and other abuses spreading quickly. The company noted that its AI technology is successful in identifying 99% of terror content before anyone notices it.
Additionally, Facebook followed the footsteps of Apple (AAPL - Free Report) Amazon (AMZN - Free Report) and Alphabet’s (GOOGL - Free Report) Google by building its own team to develop in-house chips for its hardware. In this connection, it recently hired Shahriar Rabii as vice president and head of silicon.
We believe that the company can effectively monetize all its initiatives, which will drive its top line in the long haul.
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Facebook Hits 52-Week High on Mobile Ads & Instagram Growth
Shares of Facebook rallied to a new 52-week high of $210.46, eventually closing a tad lower at $209.99 on Jul 17. The rise in share price reflects a decent year-to-date return of about 19% against the industry’s decline of 0.7%.
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This Zacks Rank #2 (Buy) company has a market cap of $602 billion and a long-term expected earnings growth rate of 24%.
The increase in share price can be attributed to the strength in its advertising business, mainly mobile advertising which is fuelled by growing user base and surging popularity of Instagram. Moreover, the company’s growing initiatives to secure its platform is also a tailwind.
Facebook Rides on Mobile Ad Growth
Facebook has been benefiting from its massive user base, increasing engagement levels and frequently updated applications such as Messenger, WhatsApp and Instagram. Per a recent report by Sensor Tower, Messenger, WhatsApp, Facebook and Instagram were the most downloaded apps on both iOS and Android in the first half of 2018.
We note that Instagram has emerged as an important cash cow for Facebook. The platform has doubled its user base over the last two years, crossing 1 billion monthly users recently.
Facebook’s huge user base of over 2.2 billion combined with that of Instagram makes it highly attractive to advertisers. Instagram has more than 2 million active advertisers. The Instagram Stories platform, which was opened to global advertisers in March 2017, is also gaining traction.
As stated in its last earnings conference, Facebook and Instagram have 80 million and 25 million business profiles respectively, of which, 6 million advertisers are on Facebook and the rest 2 million on Instagram.
The company is cashing on its strong user base by attracting advertising dollars, which grew 60% year over year to $10.7 billion (91% of total ad revenues) in the last reported quarter.
The company is leaving no stone unturned as it continues to bring features aimed at customer retention. Moreover, the company’s average price per ad growth to 39% is a positive given its advertising supported business.
AI Initiatives to Secure the Platform
Facebook has been taking various initiatives to keep its platform secure, especially after the data misuse allegations that surfaced mid-March. The company is investing in artificial intelligence (AI) to prevent false news, hate speech, suicide attempts and other abuses spreading quickly. The company noted that its AI technology is successful in identifying 99% of terror content before anyone notices it.
Additionally, Facebook followed the footsteps of Apple (AAPL - Free Report) Amazon (AMZN - Free Report) and Alphabet’s (GOOGL - Free Report) Google by building its own team to develop in-house chips for its hardware. In this connection, it recently hired Shahriar Rabii as vice president and head of silicon.
We believe that the company can effectively monetize all its initiatives, which will drive its top line in the long haul.
Currently, Facebook carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>