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Facebook Inc is A Strong Contender In $1 Trillion Race

Facebook Inc (FB)

Facebook Inc is doing quite well. On Wednesday, the shares of the social media giant hit an all-time high. Now, the social networking site is worth about $350bn, and from their initial offering price of $38 in 2012, the shares are up by more than 200% now. It would not be a surprise (and its not out of question) if sometime in the “future,” the firm is worth $1 trillion, notes a report from Paul R. La Monica of CNN.

Facebook Inc

What could help Facebook hit $1 trillion mark?

There are many things to like about the social networking giant. The firm announced recently that its Messenger has crossed the 1bn monthly active user mark, and has now joined the core Facebook service, WhatsApp and Groups at the nine zeroes milestone. Instagram, the popular photo-sharing site, is halfway there, with 500m monthly active users.

As for Facebook’s Live streaming service and virtual reality subsidiary Oculus, they are doing quite well. Also, given the success of Pokemon Go, it will be interesting to see if Oculus/Facebook tries to do more in augmented reality (AR). Oculus Rift, which is one of Facebook’s often ignored assets, could dominate the virtual reality segment in the years to come. The future of the social network is great, but the present is good as well.

On July 27, Facebook Inc will be reporting its Q2 earnings. The analysts predict another quarter of blockbuster growth. From a year ago, the Wall Street is anticipating a more than 60% increase in earnings per share, and nearly 50% increase in sales.

A race among the big names

Facebook would have to go up another 185% to get a trillion dollar valuation. It would need to put its stock price at about $345. Currently, the share is trading at about $121. The consensus price target for the next 12-months is $144, and this would place a $420bn value on the social network giant.

Like seen with the tech firms in 1999 and early 2000, Facebook does not have an insane valuation. The stock is trading 26 times the earnings estimates for the next year. Of course, it is not cheap, but given its earnings growth potential, it may be reasonable. Also, it is a much better bargain than Amazon – trading at 75 times the profit forecasts, the report says.

Now, Facebook Inc is worth about as much as Amazon. The two technology giants trail only Exxon Mobil, Alphabet, Apple, Warren Buffett’s Berkshire Hathaway and Microsoft. It cannot be said or predicted which one of these will reach a $1 trillion market valuation sooner. And, if you have any idea, or want to make a guess, do let us know.

On Thursday, Facebook shares closed down 1.07% at $120.61. Year to date, the stock is up almost 14% while in the last one-year, it is up 27%.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.