Last year’s stock performance by Facebook was incredible and better than any forecast expected. Many analysts forecast that it may have peaked, and, for late investors, the bus had been missed. But Facebook stock is still outpacing the S & P 500 and does not look like it is going to slow down anytime soon.
On Tuesday, the tech giant’s shares reached an all-time high of $311.35. Whilst it did not maintain this until the market close, it still ended the day at $306.62. This is up 12% for the year to date. Compare this to the S & P 500’s gain of 8.5% over the same period, and you get a clear idea of how the stock has performed.
Last year’s performance was even more remarkable given revenue growth had slumped. In part, a return to higher revenue figures is what is fueling the recent buoyancy.
A surge in revenue
Last year, Facebook suffered a significant slowdown in revenue growth. Earlier in the year, lockdowns and restrictions due to the pandemic had caused many advertisers to reduce or pause their ad campaigns. But by the fourth quarter, a recovery was taking place. In the last quarter of the year, the Social Media giant’s revenue grew by 33% year over year, an acceleration of 11% when compared to Q2 and 22% in comparison to Q3.
It is also expecting increased revenue from its e-commerce shops push. And let us not forget their Oculus 2 VR headset. Although this accounted for only 3.2% of Facebook’s earnings, when you look closer at the figures, they rose by 156% year over year.
Facebook’s chief operating officer, Sheryl Sandberg, explained that – “This was a strong quarter for our business, as the acceleration of online commerce we’ve seen during the pandemic continued into the holiday season.”
Dave Wehner, Facebook’s chief financial officer has said that he expects the current year to “remain stable or modestly accelerate sequentially in the first and second quarters of 2021.”
He did throw in a word of caution though, warning that the lapping of strong growth rates in the second half of the year will put pressure on Facebook’s year-over-year growth rates. Facebook has a history of being conservative when looking into the future, and although a deceleration is likely later in the year, the figures are still likely to show double-digit growth rates.
Shares could be undervalued
Despite the promising figures, Facebook shares may well be trading at a cautious valuation. Analysts expect Facebook earnings per share to grow at an average of 22% over the next five years.
Facebook is looking like a good bet for the future and those looking at longer-term investments might struggle to find a safer option.