Facebook Inc shares are down 5 percent in the past one month. The volatility in the markets is high, and most investors are sitting on the side-lines. But amid all this bearishness, some stocks have entered into bargain territory, and have become ideal buy on dips candidates. Facebook tops the list of such stocks.
Facebook has an Impeccable Balance-Sheet
Investors have been scarred in the past month, and everyone is looking for safety. As ironic as it might sound – tech stocks are not supposed to be safe – Facebook is among the safest in the block. If you don’t believe me, just dig into its balance-sheet. The firm has a measly $150 million in debt compared to a massive $14 billion in cash. Operating cash flow this year should come in around the $7 billion-mark. And Facebook’s corporate structure is such that it can make big stock-based acquisitions – like WhatsApp in 2014 – that will allow for future growth without diminishing the cash balance.
Scale is Unrivaled and Growth in Unmatched
Facebook Inc ’s reach is something never seen in the history of corporate America. During the second quarter, the social network recorded 968 million daily active users, with the monthly active users figure standing at a mind-boggling 1.49 billion. This means that close to 20 percent of the entire global population logged into Facebook last month. And all this was achieved through a single digital platform. No marketer can overlook such a staggering reach.
And not just the scale of operations, the way the firm keeps on growing is also impressive. Last quarter saw Facebook report a 17 percent y-o-y increase in daily active users. That would add up to raw gains of around 139 million daily users, or 40 percent of Twitter’s entire user base!
Strong Earnings, Dominant Mobile Presence
Facebook Inc has been consistently beating Street profit estimates since 2013. What is astounding is that all this came despite the firm spending heavily in the future. Just look at last quarter. Facebook’s total expenditure soared 82 percent y-o-y, and the firm still managed to easily top the consensus earnings forecast. For the current fiscal, profits are expected to grow by 17 percent, while revenue should increase a robust 38 percent.
Another remarkable feature of Facebook’s growth has been its timing. It realized the world was going mobile, and swiftly made the transition from desktops to smart phones. The dividends are showing now. The number of mobile users jumped 23 percent y-o-y to a whopping 1.31 billion. That’s simply phenomenal considering that until a few years ago, it did not have any mobile business whatsoever. And mobile is where the future holds. eMarketer expects mobile ad spend to surpass desktop by the end of the year. Facebook Inc will be there to grab a big chunk of that pie!