) went public at $38 per share on May 18, 2012 and it didn't take
long for the naysayers to look brilliant. The stock went into a
four-month swoon that culminated in early September when the shares
fell below $18. The "I told you so" crowd had a field day.
But then a strange thing happened. The stock flattened out, traded
in the $20 range until November, then shot up to the $25-$30 range,
where it meandered around until late July of this year. Since then,
it has been on fire, breaking through $50 last week. The pessimists
have long since run for the hills.
So what happened? Let's run through a few of the key statistics on
the company to remind you just how big this business has become.
By now, many of you will have seen the movie
The Social Network
, which told the story of how the company was started in a dorm at
Harvard and morphed into one of the largest Internet businesses in
From the humble beginnings, the company has grown into a business
with a global footprint that employs 5,000 people. Facebook has
over 800 million active users on its mobile platform with 699
million daily users. That works out to over 1.5 billion monthly
users (as of June 13). That's incredible when you stop to think
I'm pretty sure I don't need to explain what Facebook is, or does,
since most of you probably use it. Very few companies have been
able to manage this type of scale in such a short period of time,
and although it has had some hiccups along the way, for the most
part, this is a stunningly successful enterprise.
In addition to continually updating its platform, the company has
made a number of acquisitions dating back to 2005. The most
important of those was Instagram, for which the company paid $1
billion in 2012.
At the time, many analysts thought the cost was too high, but some
young people migrated away from Facebook and went to Instagram, so
FB was able to continue to hold and grow its audience. As a result,
Instagram has proven to be a bargain.
In all, Facebook has acquired 39 companies. That would be
impressive even without the growth of their core business. Some of
these companies were purchased for the human talent they offered,
others because they had unique technology offerings. But whatever
the motivation, it's been a very aggressive acquisition program.
The biggest knock against the company at the time of the IPO was
that it hadn't been able to prove that it could monetize its mobile
offerings. However, recent financial results indicate that
management has figured that out.
According to the second-quarter report, 41% of advertising revenue
came from mobile. Total revenue for the quarter totaled $1.8
billion, which was an increase of 53% over the second quarter of
The company showed a profit of $333 million ($0.13 per share) in
the quarter (GAAP standard). That may not seem like much, but it's
a big improvement over a loss of $157 million ($0.08 per share) in
the same period last year.
Traffic continued to grow as well, which is amazing given the
assumption that there was hardly anyone left to join Facebook. But
active users increased 27% year-over-year, monthly users were up
21%, and mobile increased by 51%. In fact, Facebook on mobile
phones surpassed 100 million monthly active users in just two
Facebook is now well past its initial IPO price, and it seems to me
that this could be another of those momentum stocks that continues
to outperform the market for the next couple of years.
Like Facebook, most of the high-flying Internet stocks have had
great runs recently. But I think that a number of growth funds,
which have underperformed the market, will be looking for momentum
stocks to try and gain some ground, and Facebook will be one of the
companies that will benefit.
Personally, I did not participate in the IPO, but I have been in
and out of the stock since it fell into the low $20s. Now I view it
as a core holding and this could be a stock that ultimately just
keeps going, even if the valuation looks scary from time to time.
Buy with a target of $60.
Editor's Note: This
article by Glenn Rogers was originally syndicated by
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