The Facebook (FB) stock price rose by more than 1.15% on Wednesday as the market waited for the company’s quarterly earnings. It then surged by more than 6% in extended hours after it reported strong results. It rose to $326, bringing its market cap to more than $900 billion for the first time on record.
Facebook earnings overview
In less than two decades, Facebook has turned from a small college-based social network to become the world’s sixth-largest company by market cap after Apple, Microsoft, Saudi Aramco, Amazon, and Alphabet. The company owns popular social platforms like Facebook, Instagram, and WhatsApp that are used by more than 2 billion people every month.
Facebook reported strong results on Wednesday. The company’s revenue surged by 48% in the first quarter to $26.2 billion. This was a significantly more positive figure than what analysts were expecting. The growth was also faster than what Alphabet released on Tuesday when it reported a 34% year-on-year growth.
It generated an earnings-per-share of $3.30, which was higher than the expected $2.37. Further, its daily active users surged to more than 1.88 billion, while the average revenue per user rose to more than $9.27. The management also upgraded their forward guidance for the second quarter and a full year. However, in the past, the management has always been cautious about their guidance.
These results reflected the significant growth that Facebook has achieved in the past few years. It also reflects the fact that the global economy is recovering faster since the company makes most of its money from small businesses.
Is the Facebook stock a buy?
Analysts are generally bullish about the Facebook stock price. In a note on Wednesday, analysts at Stifel boosted their forecast to $350. Those at Credit Suisse have a target of $371 while those at BMO Capital markets and Jefferies expect the stock to jump to more than $340.
Many analysts will likely upgrade their estimates this week. Data compiled by Marketbeat shows that the average target price for the stock is $331, which is a few points above where it is set to open.
From a fundamental view, there are many reasons to be bullish on Facebook. For one, it has sticky products that are used by more than a billion people every day. As such, it has created a strong moat that is difficult to penetrate. Further, it has battled the rising competition with upstarts like TikTok and Snap (SNAP) well.
Second, the global economy is set to rebound, which will help Facebook. As more people start their businesses, they will turn to Facebook’s assets like Instagram to promote them.
Third, Facebook is yet to scratch the surface of some key industries. For example, it aims to become a leading player in payments. It already offers payment services in India and recently got a license to operate in Brazil. This is a massive opportunity if the company manages to implement it well.
Most importantly, Facebook is on a journey to improve its margins. In the first quarter of 2021, the firm’s operating margin soared to 43% from 33% in the same quarter in 2020. This trend will likely continue. Further, FB is a free cash flow machine that will continue creating value for its shareholders. In fact, it has boosted its share repurchase authorization.
Facebook stock price outlook
The daily chart shows that the Facebook stock price has been in a strong rally recently. The stock is expected to gap up at $326 when it opens on Thursday.
It will remain above all moving averages and above the important support levels at $315 and $300. Therefore, in the longer term, the shares will likely continue moving upwards as bulls attempt to push its market capitalization to more than $1 trillion.