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9 Reasons To Buy Facebook Now

Robert Riesen profile picture
Robert Riesen


  • Facebook's stock has appreciated significantly so far during 2017, but I still see considerable upside based on a low PEG ratio of 1.22.
  • Facebook recently announced their 2 billionth user, but there's still considerable room for growth internationally.
  • Facebook trades at a discount to peers and also shows upside potential based on a two-stage discounted cash flow model.
  • Wall Street expects 13% upside potential in Facebook's stock.

Facebook's (FB) stock has risen nearly 36% so far year-to-date, but I still see significant upside potential. In particular, a PEG ratio of 1.22 is attractive and less than other large-cap technology peers. Based on the following 9 reasons, I'm confident Facebook can continue growing and monetizing their user base, which make it a stock to buy right now.

1. Impressive Growth Speaks For Itself

Facebook is at a stage where they are still growing sales quickly (54% growth last year), but they have also begun to turn those sales into strong profits and free cash flow.

Data in the tables above and the one below are from Google Finance.

2. Facebook is Building a War Chest

For now, Facebook isn't providing a dividend or repurchasing shares, which means all of their free cash flow is being stockpiled on their balance sheet. Facebook also doesn't have any debt, which will allow them maximum flexibility. They should be able to buy competitive threats like they have done with Instagram and WhatsApp.

3. Facebook is Quickly Adding Users

Perhaps Facebook's most impressive feat is their growth in monthly active users. For example, in 2016, they added 269 million additional monthly active users, which marked 17% growth over the previous year. This was actually more than the rate over the last 3 years, which is impressive.

Data Source: Facebook's annual reports

4. There's Still Plenty of Room For Growth

Even though Facebook recently announced they have eclipsed 2 billion active users, there's still plenty of room for growth. With a worldwide population of 7.5 billion, this gives Facebook a reach of approximately 27% of the world's population. Breaking this down a little further, Facebook has penetrated approximately 65% of the United States and Canada, 47% of Europe, and 20% of the rest of the world. According to Facebook's 2016 annual report, India, Indonesia, and Brazil were

This article was written by

Robert Riesen profile picture
I'm an avid investor, managing my own portfolio. Im also a previous Series 7 License holder and currently studying for the CFA Level II exam. Previous financial experience includes 5 years at Square 1 Bank, a commercial bank specializing in venture lending to entrepreneurs and venture capitalists: - Assistant Vice President – Life Sciences & Technology Banking - Life Sciences Client Manager - Senior Portfolio Analyst - Portfolio Analyst

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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