Facebook is one of the most popular social media platforms worldwide. Facebook Inc., on the other hand, is among the largest tech companies with a smooth and solid rise of its tradable shares after its initial public offering (IPO). This article looks into how to buy Facebook shares and whether they are worth an investment.
How to Buy Facebook Stocks in Easy Steps
Here are the easy steps to follow when buying Facebook shares in the stock markets:
- Find a reliable online broker.
- Open a trading account.
- Fund the account through credit card, debit card or bank transfer of the leading banks, such as Starling Bank, Tesco Bank, and Bank of England.
- Buy the shares.
- Keep track of positions often.
Why Buy Facebook Shares?
Unlike its social media competitors, Facebook overseas shares are bullish. Facebook’s share price was a mere $38 per share following its NASDAQ launch in 2012. However, the current share price is above $370, tracked by the Yahoo Finance news feed. Traders can make use of this website to analyse Facebook’s stock price over time.
Still not convinced about Facebook stocks? Here are some of the reasons why investing in Facebook Inc shares is a fantastic idea:
- Active Users
According to Statista, Facebook has roughly 2.8 billion monthly active users worldwide, which makes it the first social media company to reach such incredible figures. Overall, the revenue generated by these users is exceptional.
- Growth due to Continued Acquisition
Facebook constantly diversifies its investment strategy, which delights most of its shareholders. This way, the company depends on other sectors to generate income in addition to Facebook marketing. A few years ago, Facebook acquired Instagram and WhatsApp, and the two have millions of active users daily.
- Sales Growth
Even after acquiring multiple companies, it is worth noting that Facebook’s substantial revenue emanates from the ads. “In the last quarter, Facebook’s revenue totalled $26.17 billion. $25.43 came from ads and $732 million from other sales”, says CNBC.
Drastic moves into modern products and services, profit expansion and the international markets play a major role in the future of Facebook stock.
- Free Cash Flow
When making an investment decision, most investors are cautious about free cash flow because it shows the amount that remains in a company after paying for basic operations. The fact that Facebook has a lucrative and massive following means it has the edge over its competitors.
- Great Pricing Power and Profitability
Facebook has better gross margin, operating margin and financial performance than its closest challengers in the social media industry.
The Cost of Facebook Stock
For the first time, the Facebook closed above the $ 1 trillion market cap at the start of July 2021. As a result, the company made it to the top 5 most valuable companie in the S&P 500 index alongside Apple Inc., Microsoft Corporation, Amazon Inc. and Google Inc. As of July 28, 2021, Facebook stock costs $373.28.
A Fundamental Analysis of Facebook Shares
According to ChartMill analysis, Facebook has a stunning rating compared to other industries in the market. This analysis comprises the following:
Facebook has a good return on investment due to the following reasons:
- While the average return of assets in the market is -2.42%, Facebook’s return of assets is an incredible 20.63%.
- Its return of equity of 25.24% is better than the market’s average, which is 13.29%.
- Facebook’s profit margins of 35.74% are better than the market average of -4.38%.
Here are the reasons why Facebook stocks have spectacular growth:
- Its 35.8% growth in earnings per share increases averagely at a rate of 33.83% yearly. Additionally, financial markets experts predict the share earnings to increase annually at an average rate of 20.07% for roughly five years.
- After comparing the revenue’s growth ratio, the next couple of years will experience a low growth compared to the previous years.
- The past year experienced a growth ratio of 28.68%.
When it comes to valuation, Facebook performs closer to market averages due to the following:
- Facebook’s forward P/E ratio of 21.93 is relatively costly.
- Its value is lower than the industry’s standard P/E ratio of 42.73.
- Facebook’s price-book ratio conforms to the market’s standard of 6.64.
- Financial Health
The company enjoys a good health rating due to the following factors:
- Facebook quickly pays its short-term obligations because its current ratio of 6.08 is better than the market’s average of 1.98.
- The debt-to-equity ratio conforms to the industry average.
- Its recent Altman-Z score of 23.49 suggests that Facebook is safe from becoming bankrupt any time soon.
Although it is one of the best performing internet content providers, Facebook is yet to pay dividends to its investors. Instead, it rewarded the investors with a post-IPO stock’s growth of over 400%.
Is now the Best Time to Buy Facebook Shares?
This technical analysis gauge shows real-time ratings based on the chosen timeframes. However, a piece of investment advice to remember is that the gauge displays a technical analysis based on the leading technical indicators like pivots, oscillators and averages.
Is Facebook Over- or Under-valued?
Valuing large-cap stocks, such as Facebook, is challenging, and all metrics need to be in line with the company’s overall performance over time. All in all, listed below are crucial metrics used by analysts to gauge stock price performance.
- Facebook’s P/E Ratio
The company’s current share price divided by the per-share earnings over a year results in trailing 12-month P/E ratio of roughly 30x. Merely put, it means Facebook shares trade at roughly 30x the latest earnings. A high P/E ratio shows the shares are overvalued or investors are optimistic about the share’s target price outcome.
- Facebook’s PEG Ratio
Simply known as the “price/earnings-to-growth ratio”, financial experts calculate it by dividing a company’s price/earnings ratio by the growth ratio. A low ratio means shares are valuable, while a high ratio indicates that the shares are invaluable.
The good thing about this ratio is that it offers a detailed understanding of Facebook’s projected profitability.
Shorting Facebook Shares
Currently, investors hold 28.6 million Facebook short shares. Here is how to evaluate Facebook’s shorting interest:
- Facebook’s Short Interest Ratio (SIR)
This figure denotes the number of presently shorted Facebook shares divided by the standard number of Facebook shares that investors trade daily. Facebook’s SIR presently stands at 1.7. In simple words, in any trading day session where investors trade 10,000 Facebook shares, 170 shares are short.
Experts also evaluate Facebook’s short interest against the total number of tradable Facebook international shares or the general Facebook shares. Due to this, financial experts express Facebook’s short as 0.01% of the outstanding shares. Simply put, for any 10,000 Facebook shares in existence, about one share is currently short held.
- Facebook’s Environmental, Social and Governance Score
Popularly known as ESG, environmental, social and governance, are essential factors for measuring sustainability and social effects of social business models, such as Facebook. Facebook’s ESG score, for instance, estimates the risk it faces within the environment (carbon footprint), social (human rights, health and safety), and governance (tax transparency, anti-corruption, etc.). An environmental score needs to be as low as possible.
The Impact of Coronavirus on Facebook Shares
Despite the present coronavirus pandemic, Facebook shares are doing healthy. Although the pandemic left some companies devastated, Facebook shares posted good outcomes in both the American stocks and the Western stock markets.
The government enforced curfews and restricted movements during the pandemic’s peak and requested people to work from home. Consequently, people spent a lot of time on various social media company websites, such as Facebook.
On the other hand, businesses opted to market their products and services on Facebook. The fact that Facebook heavily depends on ads revenue shows it is doing fine, regardless of the Covid-19 pandemic impacts. So, Facebook offers some of the best stock ideas that traders should consider.
Invest in Facebook Stock Today
Investing in FB shares begins with buying. Remember that Facebook is part of the S&P 500 index and trades on NASDAQ. The other thing is that investing in these types of shares in companies requires a long-term view, meaning it’s ideal for those with considerable capital. Traders with a more limited budget can opt for fractional shares instead.
All in all, beginners can invest in these shares by opening a demo account first so that they can try without risking it. When it comes to risk-free practising, opening an account at Tixee is unquestionably the best choice.
Why Trade at Tixee
- Sign-up for a demo account
- Access to educational material
- Access the trading platforms across multiple devices
- Tixee offer Facebook overseas shares, meaning traders can invest in them regardless of their location
- Trade on penny stocks
- The availability of reliable stock exchanges market
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.