[NASDAQ: FB]: The year 2018 was a tough one for Facebook (FB). Issues to do with data privacy made the headlines, and voices calling for stringent regulations gained traction. The stock also took a hit like all the other FAANG stocks in Q4 of 2018. However, with the increased bullish sentiment in the market, Facebook is rising again. But it’s not just the bullish sentiment in the market that is pushing this stock, its fundamentals too give it a good potential for growth all through the year.
For starters, the user numbers for Facebook are growing. Instagram, for instance, is on a growth path. It has captured, and continues to grow in usage among young people, mostly between 18 and 29. Facebook usage by the older demographics remain stable too. This means that, in spite of all challenges that the company has been through in 2018, its prospects for 2019 look pretty good. In 2018, the company’s CEO stated that they were moving more towards stories, and increase its efforts to build communities. The company has made huge progress in this direction, and as user numbers and engagement continues to grow, Facebook’s revenues are likely to keep growing. Its growth prospects are collaborated by JP Morgan, which from its analysis, has named Facebook as one of the best internet ideas in 2019.
Facebook’s books also paint the picture of a company that has what it takes to beat the market in 2019. For starters, Facebook has beta value of 0.59. This means that it is relatively more volatile than the market, and would beat the market in a bull market. Given that sentiment is turning bullish, after the interest rates scare of last month, Facebook is likely to perform better than the market this year, as reflected by its high beta.
The company is also backed by the fact that it makes good margins on its sales. Facebook’s profit margins stand at 37.57%. With its user numbers growing, revenues are likely to keep growing too, and with its high profit margins, Facebook is going to keep giving investors good numbers all through 2019.
Facebook is also well positioned to keep making investments, such as high potential acquisitions. That’s because, the company has a high levered free cash flow of 11.46 billion. This is a high free capital that the company can use to drive growth through investments. On top of that, the company is very well positioned to obtain leverage for investments, if the need arises. The company’s current ratio of 9.0 means that it is almost debt free, and also has the revenues to pay any existing debts with ease. This makes it very attractive to lenders, in case Facebook needs to make capital intensive investments.
With such strong fundamentals and its strong grip on the social media industry, Facebook (FB) is a solid bet for investors looking for growth in 2019. Long-term, this is a company that is likely to continue giving growth and offer stability through dividends.