Facebook: Why an Impossible Opportunity May be Forming
Facebook absolutely crushed earnings on January 27th after the close and the stock experienced on of the single largest one day gains in market cap in the history of financial markets. But we already know that.
The opportunity that lies ahead is almost unthinkable.
Facebook beat or met every consensus estimate set by Wall Street from revenue and EPS, to monthly and daily active users. In fact, the revenue beat for the quarter was more than half a billion dollars. Here is the three-month stock chart:
While the stock rise is breataking, the real secret is that as the market continues to tumble, it appears that Facebook stock could return to the stock price before earnings.
Facebook hit as high as $117.59, but in just a matter of days we can see the stock has plummeted back down to $103. The closing price before earnings was $94.45. The stock now sits closer to that price that it does to its all-time high.
If the market continues to tumble, the savvy investor may find that she has the opportunity to buy Facebook stock back under $95 for no other reason than -- the market is tumbling with no end in sight.
THE REAL QUESTION
The real decision now is whether to buy Facebook stock if it does in fact tumble back down. Here is the breaktaking reality that is Facebook, and why the answer to that question appears to be, unequivocally, yes.
As of yet, Facebook has no users in China even though it has 1.59 billion monthly average users and growing. But, the company is making inroads to enter the country. Further, in the CML Pro research dossier, we discuss how Facebook will reach another 3 billion people by delivering the Internet through solar powered drones.
Photograph by Reuters
REVENUE per USER
Average Revenue per User (ARPU) rose a staggering 26% to $3.73 (re/code). This is a critical measure, because, at some point, user growth will slow, so the growth story turns to increased monetization of the user base.
Online video advertising is the new battlefield. Spending in the U.S. will hit $9.1 billion in 2016, up from $4.4 billion just two years ago.
Facebook and Google are at war, openly. Google has 175 million unique video viewers across all Google Sites in just the U.S. alone. Facebook has 90 million. Here's a chart from Statista:
Mark Zuckerberg disclosed that 100 million hours of video are watched daily on Facebook. That compares to Google's YouTube number that is between 500 million and 650 million. So, unbelievably, there is a lot of room for yet more growth.
In our research dossier "Facebook Is Going for The Kill Shot on Twitter Right Now," we discuss in detail the two new tracks Facebook is following for real-time communiques. First, Facebook introduced Live Video and Collages in December of 2015:
Today we're beginning to test the ability for people to share live video on Facebook. While watching a live video, you can tap the Subscribe button to get notified the next time the broadcaster goes live.
Then, on January 21st, bigger news was released:
Today we're launching the Facebook Sports Stadium, a dedicated place to experience sports in real-time with your friends and the world.
The company is openly considering giving video its own location on the Facebook platform for people who just want to watch videos and Mark Zuckerberg was pretty clearly pushing the new initiatives. The company revealed that 500 million people are watching video on the platform each day.
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The messaging service crossed one billion MAUs. Facebook cut the $1 a year fee but Mark Zuckerberg continued to say that the business is monetizable and that companies are now advertising on it.
In the full Facebook CML Pro research dossier, "Our Trip to India and Facebook's Impossible Dream", we discuss how WhatsApp may end up being larger than Facebook proper itself. This a totally different type of social media and has the power to connect the world and to double Facebook's reach and here's how:
Get the full research report on CML Pro.
FACEBOOK MESSENGER AND PAY
Facebook Messenger crossed 800 million MAUs. That portion of the business is focusing on mobile pay.
The company did reveal that revenue fro Payments in Messenger actually dropped 21% year-over-year but Facebook has loaded management with former PayPal executives (Source: TechCrunch.)
Further, Zuckerberg said:
"We're looking at the stuff Apple is doing with Apple Pay, which is interesting and takes a lot of the friction out of payments. It’s good for everyone."
The idea is that mobile pay will push the amount businesses are willing to spend on Messenger. We have an entire CML Pro dossier dedicated to mobile pay: You can read it on CML Pro. Here's a taste:
Here's the chart of global mobile payment transaction volume from Statista, forecasting out to 2017. This is in billions of dollars.
Bank of America expects this market to hit $3 trillion by 2022.
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The process of monetizing Instagram has already begun. The service has at least 400 million MAUs. In a stunning proclamation, Sheryl Sandberg said that 98 of Facebook's top 100 advertisers also advertised on Instagram in Q4.
Sandberg also said that the Sutterfly campaign which spans across Facebook and Instagram and is targeted specifically to women with specific interests saw a 6.4x return on ad spend.
Mark Zuckerbeg said: "I am happy. I don't show much joy, but I am happy," with respect to the virtual reality (VR) hardware and app.
Facebook has its sights set on the way we consume all gaming and media, especially movies and television. But the hardware isn't the crown jewel, its Facebook's app that goes with it.
This is why the upside for Oculus is impossible large -- spanning all of humanity per the analysis of Dave Thier at Forbes: You can get the full research dossier on CML Pro (end of this article).
WHY THIS MATTERS
If any of the information we just covered feels like a surprise, in many ways it is. The top analysts that represent the wealthiest 1% of Americans have no interest in sharing the data they are keenly aware of. But they do know when retail is selling everything they've got and that does inform their decision systems.
CML Pro is the only institutional research house that offers the exact analysis, data and visual tools that the pros have to the retail public. For example, did you know that Facebook spends more in research and development (R&D) per dollar of revenue than all other mega cap technology companies? Here's the chart:
That chart takes thirty seconds to create in CML Pro.
This is just a snippet of the fantastic reports CML Pro members get along with all the visual tools, the precious few top picks for 2016 that cover all of the rule breaking segments of our future, research dossiers and alerts. For a limited time we are offering CML Pro at a 90% discount for $10/mo. with a lifetime guaranteed rate. Join Us: Get the most advanced premium research delivered to your inbox along with access to visual tools and data that until now has only been made available to the top 1%.
Thanks for reading, friends.