The Bull Case For Facebook Stock

There’s always going to be two sides to every story. In Wall Street speak, these two sides are more commonly referred to as bullish and bearish. With this in mind, let’s look at the bull case for Facebook Inc. (FB) stock in the wake of its most recent quarterly earnings report.

Facebook’s Financials Surprise To The Upside

One of the strongest reasons to be bullish on Facebook (FB) is its recent Q2 revenue, which far exceeded expectations set by analysts before the earnings call: While the consensus was an estimate of $27.86 billion, Facebook actually brought in $29.08 billion for the quarter.

That’s an earnings per share of $3.61 versus the expected $3.02 per share. While higher-ups within the company did their best to assure investors that the next few quarters might see a gradual decrease in percentage growth as the company levels out in the wake of increased activity as a result of COVID-19, there’s still plenty to be bullish about:

Analysts forecast $29.2 billion in earnings for Facebook’s Q3 and $34.6 billion for Q4.

Facebook Is Not An App, It’s A Conglomerate

Bullish Facebook investors will be quick to remind you that Facebook is so much more than just the titular social media site: Under the Facebook umbrella, there’s also Instagram, WhatsApp, Oculus, Giphy, Mapillary, Facebook Messenger, Facebook Watch, and Facebook Portal (as well as an almost 10% stake in Jio Platforms, India’s largest mobile network operator).

All of these different components of the Facebook machine — each with its own uniquely massive appeal — help explain why investors are so bullish on Facebook stock: It represents a lot more than just a social media platform.

It’s a hugely successful multinational conglomerate.

Facebook’s Daily Active Users Soar, Again

Another key component of the bull case for Facebook stock is the number of daily and monthly active users (DAU and MAU, respectively) that use the site on a regular basis.

While key figures within the company are quick to point out that these numbers owe some of its success to COVID-19, Facebook’s DAUs and MAUs for Q2 are really remarkable: 1.91 billion daily active users and 2.9 billion monthly activie users, both up 7% compared to this time a year ago.

With more than 10 million advertisers active on Facebook platforms, the more DAUs and MAUs increase, the higher Facebook’s revenue will continue to climb.

Facebook AR and VR Are Growth Levers

One of the other pillars of the bullish argument for Facebook is how much the company has branched out outside of social media. Take its artificial reality (AR) and virtual reality (VR) efforts, for example.

Facebook only continues to invest money into Oculus, its VR company that specializes in gaming and other AR and VR-related tech, with about 20% of new Facebook job openings falling under the Oculus branch.

What’s more, Facebook also hopes to continue to improve Facebook Reality Labs, which aims to utilize AR and VR technology through the Oculus, Facebook Portal, and Spark AR and bring it to classrooms and the healthcare industry.

If successful, Facebook could revolutionize teaching. Bullish investors feel confident Facebook will be able to do it.

Ad Growth on Facebook

Looking at the kind of ad growth Facebook experienced in Q2, it’s not hard to be bullish on the company’s stock.

Across the globe, Facebook saw ad revenue, ad impressions, and ad spending go way up. (Think back to that number above: 10 million active advertisers is a huge thing!)

As Facebook continues to improve its targeted ad technology, helping advertisers to better locate the target audience with more ease than ever before, bullish investors will argue that ad growth will continue to be a huge driving force in Facebook’s success on the stock market.

Facebook’s Creator Economy Booming

A big part of Facebook’s Q2 earnings report that has bullish investors talking is the company’s pledge to spend a billion dollars on creators between now and the end of 2022.

While it sounds like a lot of money to be spending on influencers alone, consider this: not paying creators was a driving factor in the decline of former social media platform Vine, and TikTok’s Creator Fund is an equally huge factor in keeping creators on that social media platform, as well.

Facebook’s decision to invest in an enormous creator economy has made bullish investors quite happy thus far.

Facebook’s Metaverse

Perhaps one of the most interesting parts of this most recent earnings call was Mark Zuckerberg’s discussion of what he calls the Facebook metaverse.

Over the next several years, Zuckerberg says the company plans to start profiting off of virtual goods, advertising, and other virtual experience within this so-called metaverse, which suggests Facebook is creating its own virtual world where users can work and play via AR and VR tech.

If Facebook is successful — which those arguing the bull case for Facebook stock most definitely believe the company will be — then this could completely change the way we use the internet going forward.

The Bottom Line: What Is the Bull Case for Facebook Stock?

As one of the big five companies — dominating the stock market alongside Amazon, Apple, Google, and Microsoft — it’s clear to see why there are so many making the bull case for Facebook stock without even looking at the finer details like revenue and earnings calls. However, taking a closer look at these factors allows that bullish case to look even stronger.

Now, let’s review the bull case: Facebook’s financials looked fantastic this last quarter, and — if all goes according to predictions — will continue to look just as great in the next couple of quarters to come, at least.

Across the board, Facebook and its properties only continue to grow more popular (and more lucrative) as daily and monthly active users go up. This also plays into its ad growth, which also keeps increasing with each new quarter.

Combine this with its pledge to incentivize creators to use its platforms, and there’s no doubt that Facebook and its various platforms will not be strapped for users or advertisers anytime soon.

Given the company’s immense success in practically every endeavor, Facebook’s metaverse will likely be just as prosperous. All of these factors come together to form a rock-solid bull case for Facebook stock.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.