If you’re looking for value in a technology stock, Facebook Inc. (NASDAQ:$FB) is your guy! New features on the company’s Instagram app – which Facebook bought back in 2012 – are driving usage higher than ever before. As a result, companies like Snap (NYSE:$SNAP) and Twitter (NYSE:$TWTR) are struggling to keep their relevance.
Instagram is Helping Facebook
As of right now, Instagram Stories has 250 million daily users. It’s almost been a year since the Stories feature was added and usage has grown immensely. It seems that Facebook will invariably benefit from these numbers. In fact, thanks to the strong traffic numbers, it could even take Twitter and Snap customers away.
That said, advertisers may want more in-depth details on the user activity. For instance, are the daily users actually posting stories or just viewing them? Also, what are the demographics of the users?
For those looking for more answers, Facebook’s stock might shed some optimistic light on its Instagram growth when it reports its quarterly results on July 26. According to 36 analysts polled, Facebook is expected to bring in $1.12 per share in Q2, up from 97 cents a share in 2016. With a $9.19 billion revenue estimate, analysts believe that this implies that sales will grow 42.8%.
In the last quarter, Facebook’s management expressed light expectations. It said that ad blockers on the desktop would damage ad revenue. Full-year GAAP expenses are forecasted to rise between 40% and 50%. Currently, Facebook is experiencing a slowdown in growth in Canada and the United States.
Luckily, Facebook will cancel out the second-half weakness in ads by entering into partnership with studios and sports teams to help boost video content. With this, users will stay online longer, and the video content will get more engaged on the site. Video is considered to be the newer, less developed type of content on the site, therefore Facebook is moving it away from the News Feed and onto another tab.
Analyst Gives Facebook Stock an Upgrade
As we approach the earnings report, Credit Suisse upgraded Facebook’s stock on July 10, to $220 a share. With a market cap of $463 billion, low short float, and roughly $11 per share in cash, Facebook is en route to accelerating its growth by making a daring acquisition.
Facebook’s acquisition of Whatsapp proved to be a good business endeavour: the app has 1.2 billion users. If Facebook lost users, there is a good chance that they would migrate to one of several chatting apps, such as Whatsapp.
Moving forward, Facebook stock could make its next acquisition in the gaming sector. While Electronic Arts Inc. (NASDAQ:$EA) is expensive, with a market cap of $34 billion, the gaming customer could complement Facebook’s network or increase Oculus VR development. In an attempt to trigger sales, Facebook cut prices of the Rift VR headset and Touch controller to $399, or half of what the company was charging a mere five months ago. This price reduction will last for the next six weeks.
The Takeaway:
As online advertising demand makes its seasonal shift, Facebook’s growth trajectory is bound to endure some bumps along the way. And some of the investments will undoubtedly pay off: Instagram Stories and Whatsapp continue to grow in popularity. All in all, Facebook shareholders should hold onto the stock for the long term.
Featured Image: Depositphotos/© duiwoy
