The Most Compelling FANG Stock
Originally published in partnership with Seeking Alpha and due to contractual agreements, only the first paragraph can be re-purposed here:
Facebook, Instagram, Messenger and WhatsApp are ubiquitous as society migrates to social, mobile and cloud as the primary means of conducting business and personal communication.
Facebook has posted tremendous growth when measured via revenue, EPS and free cash flow over the past 4 years.
Facebook’s projected growth is greater than Google’s and just shy of Amazon’s yet has a P/E ratio that’s lower than Google’s and a fraction of Amazon’s and Netflix’s.
Factoring in its projected growth with tech comparators such as Google (GOOG), Netflix (NFLX) and Amazon (AMZN), collectively known as the FANG stocks, Facebook is superior with lower risk.
The Facebook (NASDAQ:FB) ecosystem includes its flagship Facebook social media platform, Instagram, Messenger and WhatsApp while the company makes inroads into virtual reality with Oculus. All these digital are ubiquitous as society migrates to social, mobile and cloud as the primary means of conducting business and personal communication. Facebook and its properties have dominated the social media landscape. Facebook has posted robust growth in all metrics pertaining to user growth and engagement while monetizing has moved in lock-step, the latter more specifically in the last 4 years. Facebook's earnings growth has been tremendous and has posted accelerating revenue growth over the past 4 years. EPS has increased from $0.02 at the end of 2012 to $3.56 at the end of 2016. For such a large capitalization company such as Facebook, this growth is very impressive. Utilizing the previous 4 quarters as a barometer, and more specifically its Q1 2017 quarterly results, this growth doesn't appear to be slowing down anytime soon while silencing rivals such as Snapchat (NYSE:SNAP) in its path (Figure 1). Facebook's Q1 numbers continue to impress, posting revenue and EPS growth of 49% and 73%, respectively. Facebook doesn't show any signs of letting up and makes acquisitions to drive the business now with Instagram and WhatsApp and into the future of virtual reality with Oculus. Factoring in its projected growth with tech comparators such as Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN), collectively known as the FANG stocks, Facebook is superior. Based on my analysis, Facebook provides the durable growth of all the other FANG stocks with a lower P/E and PEG ratio and thus provides a margin of safety. Facebook has plenty of room to appreciate into the years ahead given its growth and even if the stock appreciates into the high $100 range later this year, it will still be cheap on a relative basis. Here, I'll be comparing Facebook to the other FANG stocks while making a compelling case that Facebook is the superior choice.
Figure 1 - Facebook's Q1 2017 results posting revenue and EPS growth of 49% and 73%, respectively