Is it too late to buy Facebook Stock? 02 Now!

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Well guys here today facebook stock is trading over two hundred and two dollars a share it’s approaching a new all-time high it’s not quite there yet but it’s getting pretty dang close all right now i put out a video on financial education – a couple days ago that you guys absolutely loved it it’s called is it too late to buy tesla stock and i thought let’s go ahead

And do the same type of video but for facebook stock now and i think this is relevant whenever we’re talking about one of these stocks that has gone up i eat a lot which in facebook’s case it has absolutely gone up a lot okay i mean if you go back literally just a year ago a year ago at this time the shares were trading in the 120 to 130 dollar range and since

That time it has been up and up and up okay there’s a few dips here and there but needless to say i mean just look at the stock chart i mean it’s gone from about 120 130 dollars a share to now it’s trading over $200 a share and so i thought let’s go ahead let’s talk about this in depth today is it too late to buy facebook stock now it has run a lot as we see so

Far this year okay now keep in mind facebook was near the eye of the hurricane in in a lot of 2017 and especially into 2018 and i would use that analogy all the time in my private stock group whenever we talk about the lessons and i was continue to buy into facebook stock super heavy i would always use the analogy that like facebook was just caught in this massive

Amount of negativity it seemed like everywhere you could turn in 2018 there was like negative articles in that i had on top of that the market got extremely rough in general october november december of last year and when you add all that up you get facebook to go down to like 120 hundred and thirty dollars a share which i was super happy about because i bought into

Facebook obviously you know super heavy during those times and keep in mind facebook stock was over $200 a share well over $200 a share if you go back to like july in august of 2018 so stock has hardly moved in all that amount of time and that’s mainly just because they went through that entire hurricane i like to call it that’s just kind of the negativity in bad

News all right no i was able to make a really really big position in facebook stock throughout 2018 and continue to buy on those dips and i’m super thankful for that because we a cost-based on facebook of 153 dollars we have a total gain on that stock of well over $18,000 ok so neither say facebook’s treatise very well and have no plans to sell out of that position

Anytime soon ok so let’s start talking about facebook and if it’s too late to buy facebook stock now first thing we got to understand is what facebook does what their business model is facebook owns a lot of huge platforms that a ton of human beings use ok so if you look at something like facebook this is a platform that has well over a billion users on it actually

Technically over 2 billion users on it they have whatsapp that has over a billion users now facebook messenger which has over a billion users they have instagram which is the hottest social media out there that has over a billion users they own oculus which makes vr gaming headsets and that should be you know something that explodes over the next decade when it

Comes to the virtual reality space and whatnot oculus is set to be one of the biggest players there but needless to say if you’re really wondering what drives their business the biggest drivers are facebook and instagram that’s where the majority of their revenues and profits come from you know those are the things that make this business so dang valuable although

There’s tons of untapped potential in terms of business they can make from things like whatsapp and facebook messenger on a long-term basis know i’m going to show you a chart here this is daily active users and this is just for the facebook platform ok this doesn’t take into account whatsapp this doesn’t take into account instagram this is daily active users of

Just the facebook platform and you’d think with all the negativity that have surrounded facebook especially over the past year or two with elections and then what are they doing with your data and privacy and all those sorts of things you think they wouldn’t be able to grow and if anything they shrink but actually dearly active users has continued to increase it

If we look at just this past quarter over 1.6 billion daily active users and keep in mind this is just the facebook platform all right if we look at monthly active users ma use we’re looking at over 2.4 billion now on the facebook platform all alone so anybody that thinks like like facebook it can’t grow anymore or it’s irrelevant or something like that like the

Numbers just say differently what we ended up seeing was facebook in the early days was like the the youngsters got on there right the teenagers and like the college kids and whatnot that was who initially got facebook starting that’s who initially got i didn’t like made facebook cool and then some of those users moved off and some of those users end up staying

On but what we ended up seeing is we ended up seeing the masses come on to facebook the people in their thirties forties fifties sixties seventies oh for the grandmas even on facebook now where it went from just being this cool thing for the younger folks that it was like what is this thing and can we even take a serious alson that’s like it’s a mass-market product

Now and it’s continuing to still find growth which is amazing when you look at like how big it already is okay that’s just facebook platform okay now in terms of the company if you go back to like q3 2017 looking at versus q3 2019 the latest quarter they reported the business has grown revenues well over 70% during that time and keep in mind this is amazing because

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Management’s attention over the past two years i’m talking about the executive team has really been about putting out fires essentially with all the privacy and the data and the election stuff and everything and all the negativity around facebook lately they’re their real focus has been how do we clean up this business how do we make it so this business can last a

Long time because the world is theirs as long as i could get through all this negativity that has gone on in 2017 in 2018 and a little bit into 2019 it hasn’t all subsided but that’s where management’s focus is still been and you look at that chart of revenue growth business still been able to grow seventy percent plus it’s absolutely amazing and i can tell you

There’s probably not another business on the planet that could go through that much negativity and grow the revenue 70 plus percent in a two year span i can’t think of one of those companies outside of facebook i mean it’s absolutely amazing now why is this revenue going up so fast well if you know anything about business you have to advertise on facebook and

Instagram okay if you’re you know a big business selling you know products whether you’re already an established business or somebody up-and-coming if you got goods and services to sell you know facebook and instagram are usually gonna be your best places and if you look at something like cpm cpms are talked about to be on facebook to have grown like 90 percent

Year-on-year any of that’s to say there’s more more advertisers coming on those advertisers spending more money those ads are getting more expensive because you’re only have so much time you can scroll down your feed and guess what advertisers want to get in front of your face so to pay more and more and more as time goes on this is a great thing for obviously

Facebook’s business model because more advertisers have to pay the more profits facebook ends up making in the end on that whole situation okay so if we look at our pool here one of the most important metrics you can look at it with a company like facebook that has an advertising business model average revenue per user what we’re going to find here only about seven

Dollars and 26 cents average revenue per user or facebook okay but if you look at us in canada we’re up to about 34 dollars average revenue per user long term i believe that number is going to forty to sixty dollars i’m not even talking about super long term i’m just talking about over the next let’s say two to five years that none of those numbers are gonna go

To forty to sixty dollars average revenue per user in the us and canada europe over the next two to five years is gonna get somewhere around where the u.s. in canada is asked so somewhere in like let’s say the high 20s low 30s that’s where i believe europe will go over the next two to five years asia pacific will get to a place where europe is right now which is

Around ten dollars average revenue per user i believe that’s where asia-pacific will go over the next two to five years and keep in mind asia pacific right now is only a little over three dollars and then the rest of world will get to a place where asia pacific is currently which is three dollars plus average revenue per user so obviously the revenues are going to

Continue to build here the profits are gonna continue to build the net income is going to continue to build and the business model is gonna get stronger and stronger and the profits are gonna really start to explode over the next let’s say two to five years for this business model and it’ll probably become i wouldn’t be surprised if in five years from now facebook

Is the most profitable company in the world or number two okay it’s gotta be between probably them and apple google will probably be there as well but in my opinion the the profit growth and net income growth for facebook over the next five years is going to be astronomical for that business model kay operating margins right now at least as far as the latest quarter

We’re around 41% i believe that’s going to get to a place where it’s back to 46 percent to 50 percent on a longer-term basis and that will be something that increases their profitability dramatically okay now once again you look at everything facebook’s had to go through basically over the past couple of years and management’s attention being on you know how do

We you know put out all these fires how do we keep this business safe how do we make sure we don’t tear down the great business we have built here and you look at this smaller has been unbelievably profitable still look at the net income quarter after quarter after quarter it’s absolutely amazing when you talk about executive management hasn’t even been focused

On the profits and things like that it’s unbelievable and you think about the amount of employees facebook has hired over the last two years we’re talking about pretty much over a double-up in the amount of employees which has a lot more salary that’s a lot more compensation what they had to do it to basically fix all their security and privacy issues that the

Company had and all the scrutiny that came down and they had to make that move and they done it by the way if you’re wondering what happened in q1 of 2019 and q2 of 2019 they had to pay you know over five billion dollars throughout those quarters in fines from the government as well as legal expenses so that’s what killed net income in q1 and q2 of 2019 but it’s

Been amazing what the business has been able to do and what it’s been able to generate for net income with everything that’s gone on and you look at something like capital investments this is starting to slow now so the company went through a crazy spending spree basically for the last two years and it’s starting to slow now so if you look at q3 of 2018 they spent

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3.3 billion on capital investments q3 2019 3.6 billion on capital investments you look at an annual right 6.7 billion has been on capital investments in 2017 2018 they spent nearly 14 billion which is well over a double-up in capital investments but the business has been you know we just got to grow our expenses unfortunately to make sure the business was safe

And that’s what management has had to do and i think that was the right decision because at the end of the day the world is facebook’s as long as they were able to like you know put all these things at bay and all this scrutiny coming down there as long as they were able to fix those fundamental problems whether we’re talking acuity privacy elections all those

Sorts of things as long as they are able to fix that like this unbelievable song i applaud the management team at being able to handle that and getting the business to a place where it’s it’s much safer and much better from a privacy perspective and elections and all sorts of things than it was you know just a few years ago okay unbelievable balance sheet on this

Company we’re looking at a company with over fifty two billion in cash and investments and keep in mind the net income number in this christmas quarter should be absolutely insane you know cash and cash equivalents along with marketable securities should get well over 60 billion after this quarter so you know heedless to say you know i love a great balance sheet

In facebook absolutely has an amazing balance sheet and you know with that type of money it gets you through rainy days it lets you invest in the business heavily and if anything happens you know whether we’re talking valuations were to come down huge because of a recession or just something happen where vc funding dried up and maybe a lot of businesses got you

Know dramatically cheaper guess who’s going to be in a great position to gobble up a ton of those businesses a company like facebook with you know gonna be approaching sixty billion plus dollars of cash and investments on their balance sheet absolutely love that okay now if we look at some numbers here around facebook we see the company is expected to do next year

Around nine dollars and fifteen cents of eps which would be up dramatically versus this year which analysts are expecting about six forty five this year you know i could push up to over seven dollars depending on what they report for this current quarter we are in right now we’ll have to see all that shakes out but needless say analysts are expecting nine plus

Dollars per share of eps i think they’re gonna probably do ten plus dollars in 2020 i don’t think analysts have modeled quite how dramatically a change where basically you’re not gonna be spending nearly as much on capital investments in adding employees and all those costs that could bring down net income at least in the short term i don’t think they modeled

It correctly i think the company has a great probability of earning ten dollars or more than ten dollars next year in 2020 but needs say even if they do nine fifteen that’s a dramatic uptake year-over-year now also if you add on top of that the business is expected to grow revenues by close to twenty two percent that’s what anil also expected next year you know

Don’t be surprised if those numbers are wrong as far as they actually grow a little faster in that facebook historically has been a company that is being able to be what analysts are expecting so if analysts are expecting let’s say twenty five percent growth for a quarter and you know facebook’s historically been a company that would beat that and do 26% 27% 28%

Won’t to see all that shakes out but at the end of the day even if they grow 21.7% which the average analyst you know projects the company that is phenomenal phenomenal growth and you’re not gonna find many companies out there that have the type of scale facebook does well pretty much nobody has a type of scale in terms of users but i’m just talking about big tech

Companies you’re not gonna find a lot of them that are growing at a twenty two percent revenue clip is just not and i expect facebook over the next five years to be able to grow at least 15% plus when it comes to revenues per year easily each and every year for the next five years so need to say this is a business that has a lot of growth ahead of it over future

Years because those advertising rates was going to continue to go up where you gonna advertise like if you’re a business where are you gonna advertise you have to be you have to be on facebook and instagram if you’re a company if you’re spending money anywhere else over facebook and instagram it’s like what are you doing with your money you just have money to

Waste because you’re gonna get way more bang for your buck by doing it on facebook and in the instagram platform at the end of the day okay so that’s why their business will continue to increase pretty dramatically each and every year for years to come in the future all right no here’s where this gets real real interesting here’s why i say the stock is actually

You’re not too late to buy the stock and actually actually shouldn’t be buying more shares of the stock here okay it’s at a forward p of 22 a forward p of 22 on this company keep in mind real quick here the market in general the market in general right now is trading at a forward piece somewhere around probably around getting close to 19 or so okay so facebook’s

Slightly above that but keep in mind facebook’s growth is parabolic compared to the average company that’s trading in the s&p 500 something like that most those companies or you know kind of like break-even on their business or maybe slight growth like a three to five percent growth facebook’s over here going to grow 20% plus in 15% plus for years to come in

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The future and a b of trading only a little above what the markets trading at it’s rather a joke but not only that this is the best deal in big tech by far in a way when you’re talking about these companies these huge tech companies that have hundreds of billions of dollars a market cap they’re by far and away the best deal could you look at another company okay

Look at something like google mcdougal i definitely like google i love google stock i think it’s a great stock but it trades it a forward p/e of about 25 keep in mind facebook was at 22 and i can almost guarantee you if we’re gonna look at who grows their net income more over the next five years google or facebook i’m gonna say without question facebook facebook

At the end of the day it’s just a younger google essentially where they just found a better way to get and they found a better way to even do advertising then a company like google google’s amazing but there’s no way google is going to basically grow net income faster than facebook over the next five years but it’s trading at a higher valuation and google has

A lot of the same regulatory risk around it that a company like facebook so it’s not like a risk reward standpoint it’s less risky or something like that they both have risks definitely associated with them and there’s no way google will outgrow facebook in my opinion when it comes to net income over the next five years so facebook should be trading at a premium

To google and quite a bit of a premium however we have an opposite situation where google is trading at a premium to facebook it literally just doesn’t make sense okay you’ll get a stock like apple i love apple i bought apple on that huge dip earlier this year i covered on the channel when it was like $145 a share we made a lot of money on it i took those profits

On believe i invested those in a tesla stock which has done even better for us and so neither say i love apple i believed a lot on you know 5g i’m invest in some companies that do business with apple they’re apple suppliers but apples trading our forward pea approaching 19 which is fine and dandy for apple that’s around where the markets trading out right now in a

Forward pea basis but once again if we’re comparing facebook and apple it’s not even going to be remotely similar net income growth over the next five years facebook will massively grow faster net incomes over the next five years if you’re gonna look at it five years from now what does facebook net income as a percent growth over the next five years what is apple’s

It’s not even gonna be close facebook will well outgrow them and you’re looking at it and facebook’s trading at a premium to them and it’s not a big premium it’s a three points on a forward pea basis when really this company should be trading at you know probably 7 to 10 points higher than apple so if you look at this you know nothing wrong with apple trading in

At 18 or 19 40 bases but if we’re if apples gonna trade at 18 and 19 forward p bases then facebook needs to be trading out of 28 to 29 in my opinion okay microsoft another huge tech company we look at something like that that one’s trading out a forward p of well over 25 another company that there’s no way microsoft outgrows facebook over the next five years net

Income i’ll just be out willing to take that bet with anybody and here we have a situation where microsoft is trading at a big premium to someone like facebook and it just doesn’t make sense because facebook well-well-well outgrow any of these big tech companies then you look at something like amazon okay amazon’s trading at a forward p/e of 60 to 70 right now

Meanwhile i’m not even convinced that amazon will grow their their net income faster than facebook over the next five years but you have amazon which definitely will have a lot of risk around it trading at a forward p of 60 or 70 versus facebook 22 it just doesn’t make sense so in my opinion facebook is still even though it has gone up a lot this year it is still

A stock that i’m very very interested in buying and adding more shares up and i now consider facebook while i’ve considered it pretty much most of 2019 i consider it the easiest money in the stock market which i usually call apple stock the easiest money in the stock market i did that video maybe a year and a half ago kawaii apple is easy money and i should do

A video why facebook stock is easy money because it is it let me just laugh out loud at that people i mean and it’s unfortunate a lot of people deleted their comments on on why they thought i was crazy and why a pilates e money and that’s what apple was a hundred something dollars a share and they’re like oh no you know you’re not talking about anything apple’s

Doomed in this and that and obviously apple today trades are i’m not sure if it’s doubled up since that video came out about a year and a half ago but it is up massively but now i look and if we’re looking out to the future where’s the easiest money in the stock market from a risk/reward standpoint in my personal opinion it is facebook stock guys so hope you enjoyed

This video as always let me know your opinion down there in that comment section make sure you smash the thumbs up button if you enjoyed today’s video and if you didn’t agree with today’s video don’t worry and another year and a half i’ll circle you and we’ll be making a video about you when i make a video about the next stock that is the easiest money in the stock

Market alright anyways hope you guys enjoyed thank you for watching have a great day

Transcribed from video
Is it too late to buy Facebook Stock? $202 Now! By Financial Education

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