Facebook Inc - Stocks

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The Internet has revolutionized the world and touched nearly every aspect of life, whether it is professional or personal. Apart from making it easy for people to complete their tasks, the Internet has played a considerable part in allowing seamless communication. Traditionally people living in distant places used to write letters to communicate until telephones were developed, but still, people could interact only for few moments.

However, the advent of social media platforms allowed people to stay connected 24/7 without any disruption. One of the most popular social media forums that took the world by storm was Facebook, which was launched by an American named Mark Zuckerberg in 2004. The purpose of Facebook was to let people connect, interact and write their thoughts and share various types of content, such as pictures and videos through computers, laptops, smartphones, and tablets.

Facebook has grown tremendously in the late 2000s and now become one of the most valued companies based on market capitalization. Facebook belongs to the prestigious group ‘FAANG’ that signifies the most valuable US companies, which include Facebook, Apple, Amazon, Netflix, and Google.

Facebook is based in Menlo Park, California, and has over 2.50 billion monthly active users. In 2010, Facebook was the most downloaded mobile application all over the world. Initially, Facebook was launched for people to connect and interact socially, but its services have become innovative, and the social platform also acts as a marketplace where products and services can be bought and sold.

Facebook has almost 45,000 employees, and the social media platform is available in 111 different languages.

History of Facebook

Facebook was initially formed as ‘The Facebook’ in February 2004 as a project by Mark Zuckerberg and his colleagues Dustin Moskovitz, Chris Hughes, Andrew McCollum, and Eduardo Saverin at Harvard University. Just after the first day, nearly 1200 students signed up and made a profile on the social network.

In the beginning, the costs of keeping the social website operational were challenging, and the payments were made by Zuckerberg and Saverin, who both had invested in the project. To gather money and meet operational costs, advertisements were also run on the website.

The membership at first was reserved to the students of Harvard University, but then it was extended to other colleges and universities that included Ivy League, Stanford University, Columbia University, Yale University, and MIT (Massachusetts Institute of Technology). It was in 2006 when Facebook became available for the general public who could make a profile if one had a genuine email address and was 13 years or older.

Soon after the tremendous success of Facebook, Mark Zuckerberg was accused of stealing the idea from Winklevoss brothers, who also studied at Harvard University. The accusation quickly changed into a lawsuit, and legal proceedings were held. The case was closed in 2008 with a settlement payment worth $65 million. Co-founder Saverin also sued Facebook when Zuckerberg diluted his holdings in the company. Saverin walked away with 4% to 5% shares of the company.

Facebook is a relatively new company when we look at other global brands that have a long and rich history of economic ups and downs. Facebook has 16 years of business, and in this short history, the company has grown from a university final year project to a multibillion prospect and an ever-increasing brand value. Facebook has done numerous acquisitions in its short history to expand its services and develop the business. Few of the popular acquisitions of Facebook according to a particular timeline are

• In 2009, FriendFeed
• in 2010, Divvyshot and Octazen Solutions
• In 2012, Instagram
• In 2013, Onavo
• In 2014, WhatsApp and Oculus VR
• In 2015, Wit.ai
• In 2018, Dreambit
• In 2019, Beat Games

The most popular acquisition of Facebook is ‘WhatsApp’ as it is the most widely used mobile application for messages, audio, and video calls, and sharing of content. Facebook has numerous applications, and WhatsApp and Facebook Messenger are two of the most popular and successful applications. WhatsApp has over 1.5 billion users in more than 180 countries, and nearly 1.2 billion users use Facebook Messenger. In total, the applications of Facebook has nearly 3 billion users who actively use online services.

Facebook filed for IPO (Initial Public Offering) on February 1, 2012, and expected to raise nearly $5 billion. The shares of Facebook were valued at $38, and business valuation was $104 billion. Facebook Company announced selling 25% more shares just two days before trading publicly seeing the high demand.

Facebook shares started trading on NASDAQ on May 18, 2012, and ended at a price of $38.23. After the first day, Facebook managed to gather a staggering $16 billion, which was the biggest IPO in US history by a technology firm. However, the initial momentum was not stable, and after a few months, Facebook posted a low stock value of $17.55. It was not until the third quarter of 2013 that the company made a 100% retracement.

In the next six years, Facebook’s stock value increased significantly, and apart from short price fluctuations, the share price surged and reached a record high value of $217.50 in June 2018. But the progress was hampered considerably due to the Cambridge Analytica scandal and other data privacy issues, and the share price dropped to $176.26 on July 26, 2018. The stock value further dropped at the end of the year and reached $124.06 on December 24, 2018.

Since 2019, Facebook’s share price has been moving in a bullish trend and closed the year at $205.25. The share price touched record high value of $223.23 on January 29, 2020.

Current Business and Investment of Facebook

Facebook is recognized as the leading and most popular social networking website, and the company strives to provide the most user-friendly environment where people can interact and share content either through computers, laptops, smartphones, or other mobile devices. Facebook Inc. has a variety of applications such as WhatsApp, Instagram, Oculus, and Messenger that allows people to communicate, share content, and find about the latest news.

• Facebook is the main social media platform of the company that has widespread popularity all over the world. You can easily connect with your family and friends and even develop friendships with new acquaintances. Facebook has a very simple interface that can be used by people of every age to connect socially.
• Instagram is probably the most used application when it comes to uploading your recent media content that includes pictures and short video clips. You have the option to use different types of filters according to your preference and also tag people you know.
• Messenger is another commonly used application that allows instant communication between two or more users.
• WhatsApp is arguably the most used messaging application in the world. The application is used by over 1.5 billion users who send messages through text, images, videos, and even share documents
• Oculus is another segment of Facebook Inc. that is a virtual reality platform that allows users to enter an interactive but virtual environment to play games, and connect with each other.

Over the years, Facebook has redefined and upgraded its user interface according to modern trends and consumer preferences. The users can easily send Friend requests, update their status, press the Like button, upload pictures or videos, and share multimedia content easily. Facebook has given valuable opportunities to connect with your friends and family who may live in different places but interact with you nearly every day.

Risk and Potential in Facebook Environment

Facebook is a technology giant and a leading global company when it comes to social media networking. The company has done many purposeful and valuable acquisitions to diversify its portfolio. SWOT analysis is a valuable management tool that allows business companies to examine their progress and measure the performance according to industry standards. The SWOT analysis of Facebook is given by

• Strengths

Facebook is used nearly every day by more than 1 billion users that signifies its popularity and success. The social media platform has quickly become the top spot for advertising anything. The user base is expanding every day. People can easily connect and interact. There are new features such as games and other applications to keep people entertained. Multimedia content from different sources can easily be shared. Facebook manages WhatsApp and Instagram, which are two of the most popular social media platforms. The platform provided by Facebook is used for many public awareness campaigns and has a particular social and political impact.

• Weaknesses

An open social media platform always has a large number of fake accounts and profiles, and similar is the case with Facebook, and the users have to be careful when posting their private pictures and videos. Authentication, data leaks, and fake celebrity profiles are common on Facebook and occur frequently.

• Opportunities

Facebook has the opportunity to grow by allowing businesses without any online presence to cater to a wide local and international audience. There are multiple business opportunities that Facebook can tap into in emerging economies.

• Threats

The main challenge for Facebook is making a strict policy against users who make fake profiles. There are many governments of different countries that monitor the usage and sometimes even ban the website altogether. Facebook has to constantly upgrade its services as we live in an age where people quickly lose interest from one thing and look for some other innovative technology or social media platform. Facebook also faces competition from other social platforms such as Twitter that has almost 330 million monthly active users, along with Snapchat, LinkedIn, and Pinterest.

Stock Analysis of Facebook

Facebook is listed and actively trades on the NASDAQ with the ticker symbol ‘FB.’ The company is listed under the ‘Technology Services’ Sector, and the industry is ‘Internet Software/Services.’ Facebook is also a member of other indices such as the NASDAQ-100 Index, S&P-100 Index, and S&P-500 Index.

The all-time high share price of Facebook was $265.28 on August 6, 2020, and the average price in the last 52 weeks is $201.72.

Facebook stocks are seeing a bullish pattern, and the share price is reaching new heights after each passing day. Experts predict that the share price of Facebook will touch $300 in the near future as it is touching almost $270 now. The Coronavirus pandemic has forced people to stay at home and practice social distancing, which has increased Facebook usage considerably. Analysts expect that while businesses all over the world have struggled and performed badly due to Covid-19, but Facebook will emerge even stronger post Coronavirus situation.

On June 26, 2020, Facebook’s stock fell 8% to 216.32, and three days later, the share price fell further to close at $215.38. However, the share price surged in late July and the first week of August and trades close to $270. Facebook’s earnings per share (EPS) rose 101% in the first quarter to $1.71 per share. The revenue grew 18% to $17.74 billion. The revenue from advertising grew 17%, while ad pricing fell 16%. Facebook has a market capitalization of nearly $760 billion that shows its brand value, which appears that it will inevitably grow more.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.