Credit: Facebook's Messenger Payments. Source: Facebook.Facebook stock has climbed 30% over the past year, handily outperforming the NASDAQ's 22% gain. But after that big rally, does the stock still have room to run? To answer that question, let's do a simple SWOT (strengths, weakness, opportunities, and threats) analysis of Facebook's business.
Facebook's Messenger Payments. Source: Facebook.
Facebook also recently expanded into LinkedIn's backyard with "Facebook at Work," which lets businesses create their own social networks. Facebook's Oculus VR could also launch its long-awaited Rift VR headset later this year, and the company is launching Internet.org in new markets to tether more developing market users to its ecosystem.
Threats
Those are all lucrative long-term opportunities, but Facebook also faces four near-term threats. First, a strong dollar could weigh down Facebook's top and bottom line over the next few quarters. Second, Facebook faces ongoing questions about privacy in the EU, which could lead to a damaging probe of its business strategies.
Third, data breaches could eventually turn hacked Facebook accounts into "skeleton keys" for SSO connected apps and websites. Lastly, the rise of ad-blocking extensions like Facebook AdBlock could reduce the profitability of Facebook ads. According to research firm PageFair, a similar extension, AdBlock Plus, cost Google $887 million in potential ad revenues in 2012.
The verdict
In my opinion, Facebook's strengths and opportunities outweigh its weaknesses and threats. It's the world's largest social network, it's profitable, and its ecosystem is growing in multiple directions. Facebook stock isn't fundamentally cheap at 30 times forward earnings, but it's still cheaper than shares of LinkedIn and Twitter, which have respective forward P/E ratios of 59 and 55.
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The article SWOT Analysis of Facebook Inc. originally appeared on Fool.com.
Leo Sun owns shares of Apple and Facebook. The Motley Fool recommends Apple, Facebook, LinkedIn, and Twitter. The Motley Fool owns shares of Apple, Facebook, LinkedIn, and Twitter. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
