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What’s Next for Facebook Stock?

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What’s Next for Facebook Stock?

The social media giant enjoys stellar earnings despite botched metrics and bad publicity.

The stock that stumbled out of the IPO gate in 2012 – and was soon thereafter proclaimed a dud – has since become a Wall Street stud. And just a few days ago, Facebook posted a performance that shocked even the stock’s most ardent backers.

Facebook’s earnings for the last quarter of 2016 soared to $1.24 per share: an astounding 41 percent higher than the previous quarter (88 cents) and more than double the first quarter of 2016 (57 cents). With the latest report, which covers the period ending Dec. 31, revenue shot up 51 percent to $8.81 billion, compared to $5.84 billion in the same quarter last year. It also easily beat Wall Street’s expectations of $8.51 billion.

“Facebook is only going to get bigger, better and richer,” says Larry Harris, the chief strategy officer at Sightly and a man who once served as global chief evangelist for the Facebook/IPG collaborative venture after IPG invested $2.5 million in the social media juggernaut.

The stock that stumbled out of the IPO gate in 2012 – and was soon thereafter proclaimed a dud – has since become a Wall Street stud. And just a few days ago, Facebook posted a performance that shocked even the stock’s most ardent backers.

Facebook’s earnings for the last quarter of 2016 soared to $1.24 per share: an astounding 41 percent higher than the previous quarter (88 cents) and more than double the first quarter of 2016 (57 cents). With the latest report, which covers the period ending Dec. 31, revenue shot up 51 percent to $8.81 billion, compared to $5.84 billion in the same quarter last year. It also easily beat Wall Street’s expectations of $8.51 billion.

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“Facebook is only going to get bigger, better and richer,” says Larry Harris, the chief strategy officer at Sightly and a man who once served as global chief evangelist for the Facebook/IPG collaborative venture after IPG invested $2.5 million in the social media juggernaut.

Clearly, the revelations impacted FB. After cresting at an all-time high of $133.28 on Oct. 24, the stock slid close to 14 percent by year’s end – making it one of those major market players that curiously did not enjoy a post-election bounce. That the social media site weathered attacks for fostering the spread of “fake news” related to the presidential contest didn’t help matters.

Yet so far in 2017, FB has pretty much made up that lost ground. It trades at about $132 and assuming it can put the recent bad (and fake) news behind it, the future bodes well as media advertising undergoes a historic shift.

“2017 will be the first year that digital ad spend is higher than TV per e-marketer,” says Aaron Goldman, CMO at 4C Insights, a data science and media technology company. “With more and more video consumption happening across screens – sometimes simultaneously – it makes sense that Facebook is making a serious play for TV budgets.”

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Meanwhile, its nucleus of companies reads like an all-star lineup of high-tech. It includes WhatsApp and Instagram, along with PrivateCore (which makes software to protect server data). Arguably, Instagram is the shining jewel. Facebook paid $1 billion for the photo-sharing app service in 2012, and the investment has paid off handsomely. Instagram boasts some 600 million monthly users, nearly double the 317 million on Twitter (TWTR).

“For the most part, Facebook is the social media platform to beat,” says Rob Enderle of the Bend, Oregon-based Enderle Group. “It owns the space it occupies and they were able to hold off Google (GOOG, GOOGL), a far more powerful company, nicely.”

But Facebook might have its hands full with Snapchat. Described by some as “the anti-Facebook,” Snapchat’s 158 million daily active users pose at least something of a threat to Instagram, statistics show.

“The average U.S. user spent 5 hours and 23 minutes total on Snapchat in December, whereas the average U.S. Instagram user only spent 1 hour and 54 minutes total,” says Hannu Verkasalo, CEO of Verto Analytics. “Even with the launch of Instagram Stories, it’s clear that Snapchat users are still dedicated and deeply engaged with the app.”

Snapchat has just announced that it will go public and is slated to list on the New York Stock Exchange under the symbol SNAP. It also competes with Facebook on the payments front: Facebook users can send payments through its Messenger service, while Snapchat has a feature called Snapcash.

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Meanwhile, within hours of the Facebook earnings report, a Dallas jury awarded $500 million to ZeniMax Media after finding that Oculus co-founder Palmer Luckey, and by extension Oculus, failed to comply with a non-disclosure agreement. Facebook acquired Oculus VR in 2014 for $2.3 billion.

“The Oculus judgment would indicate incomplete vetting and/or a weak legal department, both of which could be problematic long term,” Enderle says.

As much as Instagram has been a winner, Oculus has yet to realize its potential. The Oculus Rift virtual reality headset, released in March, didn’t live up to its massive hype, failing as both a gaming breakthrough and a revenue machine.

So where does Facebook stand at this point? Market observers agree it will continue to make lots of money and rule the social media roost. But 2017 could also see Facebook’s explosive growth calm down as it clears its stumbling blocks and explores new ways to expand its revenue potential.

“If Facebook continues to add new members to the network, then it can certainly keep growing ad revenue,” says Michael Fauscette, chief research officer at G2 Crowd, a Chicago-based software services and solutions review website. “But will it continue to grow as fast as the past three years? I doubt it – and even Facebook itself has predicted that ad revenue will slow this year.” source http://money.usnews.com/investing/articles/2017-02-07/whats-next-for-facebook-inc-fb-stock

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