Facebook is one of the most valuable companies in the world and one of the largest American companies by revenue. Projections show that Facebook stock could rise even further over the next year! In case you’re planning on investing in this stock, read more about it below and find out how you can trade it profitably.
Facebook Stock – Overview
Facebook Inc. is an American company that engages in social networking services and other similar business sectors. Apart from the social network Facebook, other big brands that are part of its portfolio are: Instagram, the messaging applications Messenger and WhatsApp. The company is part of the Big Four, alongside Apple, Amazon, and Google – the group of American technology companies that dominated the internet during the 2010s.
Facebook held its Initial Public Offering (IPO) in 2012. The company was value at $104 billion, which at that time represented the largest valuation for a newly-listed public company. With a total of 2,406 Shares Outstanding (millions), Facebook is listed as a Class A stock on the NASDAQ stock market (NASDAQ: FB). Moreover, it is also a component of the NASDAQ – 100, S&P 100, and S&P 500 stock market indexes.
How to trade Facebook shares profitably
Facebook has been the subject of multiple headlines in the past few years, both negative and positive. However, it managed to bounce back every time and its stock is up as much as 45% in 2019 compared with the S&P 500’s 23% gain. If you’ve decided to expand your investment portfolio with Facebook shares, then here are a few tips to help you start off on the right foot:
- Assess your objectives and goals
Many investors dive right into the stock market without really knowing why. Even if it’s a giant company, simply buying Facebook shares is not going to bring you a fortune. You need to write down a plan for your investment and shape it according to your capital. Decide for how long you’re planning to hold the shares and what are your financial expectations. Are you going to give them up as soon as the Facebook stock price drops due to a negative headline or you’re in for the long run? Creating a plan will help you react in a calm and logical way in rough market conditions. Asktraders do a great job of Facebook and other live market analysis
- Find a trustworthy stockbroker
The action of trading Facebook shares itself is only possible through an online stockbroker. All you have to do is search for a reliable one and open an account. This step may seem easy, but the truth is choosing a suitable broker is difficult. Firstly, you need to check the commissions and additional fees imposed by the broker won’t negatively impact your investment plan.
Secondly, the services it provides need to meet a certain standard of professionalism, as the platform and tools are essential for successful trading experience. TradeFW.com is a great example of what a good stock broker should provide. The company puts at your disposal a safe platform, numerous tools, and learning materials, flexible account types and fees, as well as a professional support team ready to assist you.
- Information is wealth
Understanding how the stock market works and most importantly, the background of the Facebook stock and its constant position will surely boost your chances of profiting. To clarify, in the stock market, for every buyer, there is a seller. When the number of buyers surpasses the number of sellers (demand), then the stock price will go up. Conversely, when there are more sellers than buyers (too much supply), the stock price will fall. Try to stay informed and keep an eye on all the news, reports and other data about Facebook. In addition, reading books and other materials about the stock market can be a big plus!
- Approach a strategy suitable for the stock & your trading style
Like in any type of trading, you will need a strategy to make money. There are numerous stock trading strategies, but not all are right for the Facebook stock and not all of them are right for you. The strategy should match your objectives. For example, are you willing to take a big risk and sell short? Then short stocking is the technique you’re looking for. Do you want an additional income apart from the one generated by your stock’s value? Then dividend investing is the answer. You’re looking at a sea of possibilities, but the key is to pick the perfect one for you!
Facebook Stock Forecast
You’ve probably noticed that Facebook had a couple of rough years in the news. From the highly-criticized political advertising approach to the historic $5 billion fine for privacy violations, the social media giant has been facing several issues and negative headlines. However, have these tumultuous events had a negative impact on its stock price? Let’s see what the forecast looks like!
Firstly, it appears the company bounced back, while users and advertisers remained on the company’s platforms amid the turbulence. Moreover, an analyst revealed that most investors have come to terms with the fact that the privacy violation is an ongoing issue in this business sector and they expect periodic risks. The Facebook stock price didn’t record a dramatic drop, but it had a temporary negative outlook.
According to an analysis made by Investor Place, in the last quarter, Facebook made its highest level of free cash flow ever, namely $5.6 billion. The stock has traded at a free cash flow yield of about 3.75% over the past two years and other metrics, such as Average Revenue per User (ARPU), have been improving in the past few quarters. As a result, the Facebook stock could rise even further over the next year and you can expect a higher return than 20%.
Is it profitable to invest in this stock? The answer is yes! The long-term earning potential for Facebook is +10.73% in one year. In addition, the company is also posed to benefit from its shift toward digital advertising, namely initiatives such as Instagram Shopping and Facebook Marketplace.