Facebook Share Price Forecast August 2021 – Time to Buy FB?
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Shares of social media giant Facebook (NASDAQ: FB) are in the red today after closing at $359.96 on August 11th (19:59 UTC-4). The shares are, however, up by 34% this year which have led many investors to ask how much bigger can the social media giant get?
Facebook – Technical Analysis
According to the social media giant’s financial statement, Facebook’s current market cap is at $1.015 trillion with total assets worth $170.609 billion. Revenue for 2020 was at $85.97 billion with a profit margin of 33.90%, compared to $70.70 billion in 2019.
Oscillators for Facebook such as Stochastic RSI Fast (3, 3, 14, 14) (28.62), Williams Percent Range (14)(−58.93), Bull Bear Power(1.90) and Ultimate Oscillator (7, 14, 28)(56.20) are pointing towards neutral. Moving averages such as Exponential Moving Average (100)(329.96), Simple Moving Average (100)(328.05), Exponential Moving Average (200)(305.82) and Simple Moving Average (200)(299.55) are pointing towards a buy action.
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Recent Developments
Any investors who cast doubts on Facebook’s continued dominance have been addressed by the company’s most recent quarterly results. As advertisers ramped up their ad budget during the reopening of the economy, Facebook’s revenue during the period surged 56% year-over-year. The second quarter of 2021 saw a 47% increase year-over-year in advertising revenue growth and a 6% increase in ads delivered. The company’s management believes that growth will decelerate in the second half of 2021. In spite of this, analysts are rooting for strong growth during Q3, with revenue expected to rise by 31`%.
Another reason for investors to be bullish on Facebook is its impressive cash flow figures and the cash left over after capital expenditures and regular operations are taken care of. The company is currently reaching $33 billion in free cash flow on an annual run-rate basis based on the company’s trailing 6-month free cash flow. Facebook’s operating margin and revenue is in an upward trend, which will result in more free cash flow in the near future.
Should You Buy FB Shares?
Investors looking to buy FB shares at the moment should first look at the company’s valuation. While the current market capitalization may not seem justified to some investors at first, the firm has a robust cash flow and strong growth trajectory to back it up. Considering the company’s sales and profitability momentum, its current price to earnings ratio is very conservative at 27. Investors should also note that the company is capable of increasing share repurchasing and initiate a dividend while still having enough funds to cover its capital and regular expenses.
Because of this, the company can reward investors without its market cap increasing significantly. Facebook has achieved a powerful, competitive advantage via its network effect. They’ve kept competition at bay by allowing broad-based engagement from users around the world, which help draw new users to the platform. This makes it rather unlikely for competitors to even attempt to build a similarly valuable social network.
As scale itself is a value proposition of a social network, Facebook’s status is unmatched. It currently has about 1.9 daily active users on its core platform and another 2.76 billion daily active users across its other apps. It’s possible that the company runs into hurdles such as a sharper than expected slowdown in revenue growth or more competition. The number of daily users in Facebook has stalled in recent years in the U.S. and Europe. However, investors can pick up the shares based solely on their conservative valuation and current momentum.
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