Let's talk about the popular Facebook, Inc. (NASDAQ:FB). The company's shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Facebook’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Facebook worth?
Good news, investors! Facebook is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $381.50, but it is currently trading at US$276 on the share market, meaning that there is still an opportunity to buy now. However, given that Facebook’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Facebook look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 67% over the next couple of years, the future seems bright for Facebook. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since FB is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on FB for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FB. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you'd like to know more about Facebook as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Facebook, and understanding it should be part of your investment process.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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