While the FANG stocks of Facebook, Amazon, Netflix, and Google dominated 2015, they have struggled to start 2016. Three of the four are lower or at least around the market’s performance at time of writing, though there is still one outlier in the group, Facebook ( (FB - Analyst Report).
Facebook remains in a class by itself for investors, as it is the only one of the four with a strong double digit stock performance (roughly) in Q1, and it is now easily leading the group over the past six months as well. But some concerns are now starting to appear over FB and their prospects. A few are worried about user post levels and publisher interest in the Instant Article program, and the stock is selling off as a result.
However, are these really reasons to be worried about FB shares, or does this present a great entry point for Facebook ahead of the next leg up? I think that Facebook still represents a great growth story, and if you look to recent estimates and some of its metrics, I think you’ll agree that FB is a buy at these levels.
Facebook in Focus
Recent estimates for FB earnings have been moving in the right direction and we actually haven’t seen an estimate lower for the past sixty days in either the current quarter or the current year. And the growth rates expected for EPS are impressive too, as this quarter growth is expected to be 92% year-over-year and 61% for the full year.
Much of this growth is based on Facebook’s continued dominance of mobile, but also their expansion into other areas as well. The company is quickly pushing into video, while their move into VR with the Oculus Rift looks to pay long term dividends as well.
And while some might be posting less, new users are still flocking to the site and its many auxiliary properties like WhatsApp, Messenger, or Instagram. Take for example recent user growth statistics for the most recent quarterly update for their flagship Facebook site. Daily Active Users crossed the one billion mark, while mobile Daily Active Users looks to hit the one billion mark in the next report.
Facebook Growth
While Facebook’s growth track is great, it is especially impressive when you compare it to the industry at large. Projected EPS growth for FB triples the industry at large, while its net margins, at over 20%, are far higher than the industry.
Additionally, its ROE is in the double digits compared to a negative rate for the internet content industry at large, while it generates cash at a great clip. Meanwhile, its projected sales growth for the year, at over 42%, thoroughly crushes the industry average which comes in at just under 8%.
No wonder that despite the recent worries, Facebook stock is primed for more growth. In fact, we currently have the stock as with an ‘A’ Growth Score, putting it into the top echelon of stocks in this regard.
Bottom Line
Sure, Facebook shares are trending lower as of late, but the stock is still in a class by itself for the FANG group. And with its incredible growth prospects, the company has clearly earned a spot in most investor portfolios.
No wonder FB stock has a Zacks Rank #1 (Strong Buy), which puts it into rare company, as only five percent of all the stocks we cover achieve this rating. So, if you are looking for the best of the FANG stocks ahead of this earnings season, definitely give the quickly-growing, and seemingly unstoppable, Facebook a closer look ahead of their next report later this month.
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