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All Contents © 2018The Kiplinger Washington Editors
By Dan Burrows, Contributing Writer
| February 1, 2017
Retirees may spend hours a day on Facebook, but its stock, lacking a dividend, is often overlooked when it comes to their portfolios. Facebook (symbol FB, $132.78) may not hand out cash every quarter, but it can still be a good retirement stock. It trades at an attractive price and is expected to generate well-above-average profit growth. It enjoys a large and entrenched position in the digital advertising industry, which is expanding rapidly. And it has various businesses that have yet to reach their full potential, analysts say. Here are three reasons Facebook stock looks like a winner for retirees.
(Prices are as of January 26. Estimates and other figures are from Zacks Investment Research, unless otherwise indicated.)
Facebook looks like a bargain. The stock trades at 25 times expected earnings for 2017, according to Zacks Investment Research. That seems high until you consider that those estimates put 2017 earnings 28% above 2016 levels. And profits are forecast to increase 30% a year on average for the next three to five years, according to Zacks.
Facebook is not without risk, but investors who take the plunge now are getting a deal, says Credit Suisse analyst Stephen Ju. "We believe Facebook shares are mispriced,” he says.
Facebook is the most popular social media network in the world. It has 1.8 billion active monthly users. Advertisers are keen to reach all those eyeballs. Market researcher eMarketer estimates that Facebook takes in 68% of all revenue generated by global spending on social media advertising. Spending in this part of the ad industry is projected to rise from $29 billion today to $50 billion by the end of 2019, or about 20% annualized, according to an analysis by Zenith Media.
Facebook is more than its signature website. It also owns Instagram, the increasingly popular photo-sharing platform, and mobile instant-messaging apps WhatsApp and Messenger. And it owns Oculus, a virtual reality company. Credit Suisse's Ju contends that the market does not yet appreciate the profit potential from these and other endeavors. Wall Street analysts “continue to underestimate the long-term monetization potential of upcoming new products," he says.
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