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.
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
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.
Professional competitor
LinkedIn Corp (NYSE:LNKD) is focused on connecting the world’s professionals rather than being a website for social interactions. It is the world’s largest professional network with over 200 million active users in more than 200 countries. The company has been on a tear lately, gaining over 56% year-to-date.
Facebook supports professional networking applications on its website, but I do not think any of them will be able to rival that of LinkedIn. I believe the two companies are differentiated enough to continue taking share in this market. Facebook Inc (NASDAQ:FB) will continue to grow as the world’s social network and LinkedIn Corp (NYSE:LNKD) will do the same as the world’s professional network.
Game over Zynga Inc (NASDAQ:ZNGA)
For quite a while, Zynga Inc (NASDAQ:ZNGA) was successful in creating games that people loved to play. Farmville was once the most popular game around with over 82 million active users per month through Facebook. Currently, Zynga claims to have over 292 million average monthly users, but this may decline sharply in April.
Back in November, Facebook Inc (NASDAQ:FB) amended the agreement it had with Zynga to bring the relationship in-line with other gaming providers. The change meant Zynga would no longer have the ability to promote its platform on Facebook. This is terrible for Zynga because it is estimated that 80% of its revenue comes from Facebook users. The change officially took place on Mar. 31 and could send Zynga tumbling for the rest of the year.
The Foolish bottom line
Facebook Inc (NASDAQ:FB) is very young and has the ability to grow into one of the most valuable companies in the world. With over 1 billion active users, advertising revenue on the rise, and the underperformance year-to-date, I believe now is the perfect time to buy. This is a long-term investment, so do not be deterred if it does not rise immediately.
The article Face the Facts and Invest in This Company originally appeared on Fool.com and is written by Joseph Solitro.
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