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Facebook's Path To $1 Trillion

Mar. 05, 2020 7:18 PM ETMeta Platforms, Inc. (META)QQQ, SPY32 Comments

Summary

  • Facebook Inc. is the world’s 5th largest stock by index weight, contributing almost 1% to the MSCI ACWI Index, 2% to the S&P 500, and over 4% of NASDAQ-100.
  • Facebook doubling to $1 trillion or halving would have a material enough impact on index funds, but Facebook's future correlates to future US stock returns in other important ways.
  • Facebook's main exposure is to today’s most valuable scarce resource: our daily attention allocation of our question is how well Facebook maintains, mines, and monetizes that resource.
  • The coronavirus “stress test” should have minimal to positive impact on Facebook’s medium-term earnings, but should also highlight where Facebook needs to focus to get to $1 trillion.
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Facebook, Inc. (FB) is currently the fifth largest company by weight in many of the world's most tracked stock benchmark indexes. At a market cap of just over $500 billion, it makes up almost 1% of the iShares MSCI All-Countries World Index ETF (ACWI), almost 2% of the SPDR S&P 500 ETF (SPY), and over 4% of the Invesco Nasdaq-100 QQQ Trust (QQQ). This alone means FB's performance is as material to an investor in SPY as any single stock would be to an equally-weighted 50 stock portfolio. This means any investor in the S&P 500 is implied to either be taking an active view on FB's expected returns relative to the index, or making an active decision to abdicate the valuation of FB to the market's price setters. Either way, whether Facebook manages to double and become the fifth American company to reach a market value of $1 trillion, or whether it loses half or more of its revenue, earnings and market value over the next decade, that will have an impact on your index funds.

Facebook vs Google, Amazon, Microsoft, and Apple

Compared with the only four US-listed companies larger than it, each of which has already managed to break the $1 trillion market cap mark, Facebook has a focused reliance and exposure to one factor: the amount of our daily time and attention we devote to it. Attention, especially of the affluent, is arguably today's most valuable scarce asset, and Facebook's ability to maintain, mine, and monetize our attention is at least as critical to Facebook as oil is to any oil company. By contrast:

  • Apple (AAPL) makes and sells the devices many users use to check Facebook, but Apple's revenues rely more on how many of us buy a new iPhone every three years than how

This month in Long Run Income, I am taking a closer look at many of the top components of the S&P 500 and other index funds to see which are robust enough to increase your retirement income over the next 10-30 years. Get inspired with your free trial to Long Run Income

This article was written by

Tariq Dennison profile picture
5.66K Followers

Tariq Dennison, is a RIA focused on international clients and portfolios. He shares his on-the-ground experience as an expat investing in diverse foreign markets. Tariq is the author of the book "Invest Outside the Box" and soon-to-be-released "10 Ways To Invest." He lives in Switzerland, and has worked in Hong Kong, Singapore, Finland, the UK and Canada.

Tariq is the leader of the investing group The Expat Portfolio where he helps investors upgrade their global investing strategy. Features of the service include: Frequent, short, and focused analysis, access to his watchlist and dashboard, guides to specific foreign markets, and direct access to Tariq and his community in chat for discussion and questions. Learn more.

Analyst’s Disclosure: I am/we are short SPY, QQQ. 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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Comments (32)

T
This prediction makes more sense in light of the US$ becoming devalued due to massive “stimulus” (printing money). USD will be Zimbabwized (TM)
A
This price of $154 is a golden opportunity to buy the stock of facebook which will go back to the $220 levels once this corona virus scare subsides.
Value Digger profile picture
United Kingdom just announced 2% digital services tax on Facebook (FB), Alphabet (GOOG) and Amazon (AMZN):

news.sky.com/...
T
--United Kingdom just announced 2% digital services tax on Facebook (FB)--

ugh...
t
Investing in FB at these levels is a no-brainer. FB will have $1 trillion in market cap within 1 year after they launch the Calibra wallet (expected to launch Oct 2020). Without Calibra the path to $1 trillion is not clear.

“As much as I have said I would love a Facebook bank account, they are unlikely to compete with HSBC as long as customers still feel more comfortable giving their data to HSBC than to Facebook.”

Tech companies use your data to get rich and better understand their users. It’s what it is. 

I’m not saying it’s ok to manipulate people - I’m just saying hacking, misuse of data, etc, happens so frequently that people don’t care anymore. They are desensitized to it.  

My data has been hacked so many times I don’t care anymore. I probably should but I don’t.

I don’t know anyone that has deleted their FB or Instagram accounts because of the Cambridge analytica scandal.... do you? People trust FB or they wouldn’t use their products.

So I think you have it backwards. Banks and credit cards companies should be worried about how they are going to compete with FB once the Calibra Wallet goes live 🤑.
T
Thank you for your article. What are your thoughts about India? Don't you think their will be greater expansion of FB in India as it rises as China did in the last century?
Tariq Dennison profile picture
I think India will be at least as important for FB as it will be for the other tech giants.
t
Didn’t India recently lift its ban on crypto currencies?
g
FB is done will never see 200 again there is zero confidence in this company ... I have been long for 5 years with FB and I have made money but it is still my biggest disappointment I really felt by now we would be in the 5-6 hundred Range and not even close ... but government isn’t helping and privacy concerns have been an issue but most of all FB has not been able to get out of its own way and now they missed their window of opportunity!!! Very sad !
t
problems like this will always occur, it a bumpy right but well worth the long term hold!
e
Dude, you're out of your mind to think Facebook won't see 200 again. I'm surprised you make any money thinking these kind of things.
jojopuppyfish profile picture
You need to read this WSJ article from 1999 about the guy who held his 100 shares of MFST at IPO and how he made his $1 million
www.wsj.com/...
moblackty profile picture
Very well done. Will not buy this stock as I am over 70 and it pays no dividend to help support
my family. I am following your site as I thought your analysis was very well done and I agree
on the financial side of Facebook for world wide cash movement enhancement which is needed.
Thank you moblackty
Tariq Dennison profile picture
Thank you, @moblackty - I thought I'd start the decade with some fresh analysis starting at the top of the market by size, and part of my point is that many of the largest companies today don't pay dividends. Thank you for following, and I hope you like what I have to say by the time I get to the 3-5% yielders...
J
Re: Trailing PE of 29. isnt 2019 income dragged by the ftc penalty? whats the pe under normal income scenario?
Tariq Dennison profile picture
If you divide by their TTM EPS of around $7.50 one year ago instead of the ~$6.4 today, that would imply a P/E closer to 25. Trailing P/E on a name like this is no replacement for having to model out the next 10-20 years of EPS.
c
Long FB. Bought In at 170. Keep adding whenever I can!
A
A good entry for you.
Facebook will eventually touch $250 before the year is out and hence is a buy on every dip.
M
So FB takes down misinformation about the Coronavirus, but not political lies or doctored videos that are posted that prove false..?

FB is the evil empire and should be broken up or regulated into a small business...!
B
Corona virus = black swan
Kmaliki2727 profile picture
Corona virus is a known unknown not a black swan
t
plenty of people staying in, in doing so more tech is being use majority being mobiles,consoles ect. all platforms are being used the maximum! LONG FB!
c
Now if the demagogic politicians would just get out of the way, we would get there in no time.
f
So, were do you see the stock in a year?
M
I see $300 end of this year
p
I agree. Long FB for the future profit.
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