How to Buy Facebook Stock in 2021
There are more than 2.8 billion monthly active Facebook users in the world. This vast audience alone is enough reason why Facebook continues to make money and holds such power to buy out potential threats before they even become actual competitors. If you want to know more about Facebook’s investment potential and how to buy shares, check out the following sections.
Learn How to Buy Facebook Stocks in 3 Easy Steps
Find a Broker
Finding a broker and opening an account can be overwhelming, especially if you are a first-time investor. Despite this, the process is quite straightforward. All you have to do is complete a short application form, which would typically ask for some identifying information (e.g., driver's license or SSN), your name, address, and a few other details.
Analyze Facebook's Chart
Once you provide the required information, the broker will check and approve your account. Once it is open, you can access the broker’s platform, where you will find various analytical tools that will help you understand Facebook's stock price movements and the best trading strategy according to them. These tools are available for a broad range of other stocks and financial assets.
After your account is validated and you’ve finished your technical analysis, you are ready to start trading. Make sure you fund your account using your broker's available funding methods. The most convenient option is the electronic transfer, as the completion time is very short. Other methods like check or wire transfer may take a few days. Finally, when your deposited amount reaches your trading account, you can purchase Facebook shares.
Facebook Company Overview
Facebook is one of the world's most valuable companies and is among the big five in the information technology sector in the U.S., along with Amazon, Apple, Google, and Microsoft. Let’s find out more about what makes this company one of the market leaders in this competitive field.
Facebook Business Model and Revenue Streams
The company is highly successful and has taken a suite of new offerings beyond its flagship platform. As Facebook grew in size, it pursued several acquisitions, even buying potential threats, like Instagram and Whatsapp. The company bought 78 companies over 15 years, and most of them fuel its vertical integration strategy.
Facebook generated $85.97 billion in revenue in 2020. However, those earnings don't come from Facebook alone but are rather sourced from its other social media platforms.
Facebook is the owner of another massive social media site, Instagram, and the popular messaging app, Whatsapp. It also has a stand-alone Facebook messaging app called Messenger and owns various other third-party affiliated websites and mobile applications. All of these platforms generate income through advertising, reaching up to 98% of its revenue in 2020.
History of Facebook
Facebook was founded in 2004 by Mark Zuckerberg, who had the idea of making Harvard's database of students more interactive. Facebook's official launch was on February 4 that year as "thefacebook.com." It received its first outside investment from Peter Thiel for $500,000 in the summer, and, by the end of the year, Facebook had already captured a million users.
Facebook quickly expanded to universities and corporations in the U.S., Canada, Mexico, the U.K., Australia, New Zealand, and Ireland. One year later, its total user count grew to 6 million.
By 2006, Facebook opened up to everyone with a valid email address. Its first taste of profitability was in 2008 after it went through multiple changes to its advertising model. The company was also estimated to be worth between $3.75 billion and $5 billion at that time.
Facebook's initial public offering was on May 18, 2012, and it targeted to raise $5 billion. Underwriters initially valued it at $104 billion, with shares tagged at $38 each. The high demand for its shares made the company sell 25% more. On its IPO day, it was able to raise $16 billion, the third-largest in U.S. history, just behind Visa and General Motors.
Facebook continued its streak of company acquisitions and product development in the subsequent years. It went through several legal troubles, with a notable incident involving Cambridge Analytica.
In 2019, Facebook also announced its crypto plans with Libra but staggered due to privacy, national security, trading, and monetary policy concerns. In 2020, Facebook grew about 34% despite the pandemic.
Brokers That Offer Facebook Shares
Here are our top choices regarding the best brokers that offer Facebook shares and other tradable financial instruments. Based on an objective assessment, these companies provide the best tools and services overall to help you achieve your investment objectives.
Should I Invest in Facebook Stock?
With many years and several billions of reported profits plus a market cap that ranks seventh in the world, Facebook is a favoured long-term stock play, standing out due to its business model that is so simple and yet so effective.
The main reason for investing in the company is to bank on its sustained dominance. Its platforms still have the lion's share of advertising expenditures, and it has the cash ($62 billion in 2020) to continue its acquisition streak and product development.
Facebook Stock Investment Potential
Facebook's stock price has appreciated more than five-fold since its IPO. Analysts expect the stock to have an upside of at least 20% to 26%, which could then push its stock price up to as high as $324.65 per share. Some valuation models even forecast Facebook's fair value to be within $287.44 - $346.87 a share.
What Kinds of Investors Should Include Facebook in Their Portfolios?
Facebook has not yet paid a single dividend to its shareholders. Its strategy is to allocate its capital effectively by making sound investments. Therefore, Facebook is not for you if you are looking for steady returns over time.
The benefit of solid capital allocation is that it could drive the company's share price higher. Facebook is the right stock to buy if you believe in its long-term prospects and trust that the company will make the right decisions regarding managing the billions in revenues it earns per year.
How Much Should I Invest in Facebook
The exact amount to invest in stocks will always depend on your investment objectives. In the last five years, Facebook's stock grew at an 11.6% compounded annual growth rate, and when you take this into account, you have a fair estimate of how much your stock is likely to appreciate in the future. You can even use this as the starting point to determine how much funds you can afford to invest in this business.
How to Buy Shares in Facebook Stock?
One of the main methods of buying shares in Facebook stock is to use an intermediary known as a broker. However, some companies also offer Direct Stock Purchase Plans (DSPPs). Let’s see how you can invest in Facebook using these two main methods, as discussed below.
Buy Facebook Shares Using a Broker
As stated earlier, a brokerage account is necessary to start trading Facebook shares. So, the first step is to get your trading account approved, which will take approximately a few working days.
In some cases, the broker may require you to fill in your personal information and ask that you provide details about your net worth, employment status, investment objectives, and income. Once your account is validated, you can fund your account and start trading. Many trading platforms let you choose between using market orders and limit orders to buy Facebook stock.
Buy Facebook Shares With a Direct Stock Purchase Plan (DSPP)
A Direct Investment Plan is a way for you to cut the middle man (i.e., broker) and invest directly in the company of your choosing. With this method, you need to contact the company's transfer agent, from which you'll find out more about what the entire cost is for using this investing method.
One disadvantage of choosing to buy company shares directly is that you don't have flexibility. You can only invest in one company at a time using this method while adhering to specific requirements, such as a minimum initial investment and a setup fee. It also means that you need to open a separate account for each company you want to add to your portfolio. However, as of this writing, Facebook doesn't have a direct stock purchase plan.
Frequently Asked Questions
Analysts estimate that Facebook, at $257 a share, is still trading below its fair value, estimated to be as high as $375. This may mean that it’s an excellent opportunity to diversify and grow your capital.
Facebook has continued to report profits for many years. Given its market-leading position, many investors believe it will remain one of the top companies in the technology industry.
Yes, this is because Facebook moves at an average price of $8.44 a day, and its daily trading volume is about 20 billion shares. Therefore, even for short-term trades, you can still make money as long as the company’s strategy is aligned with your trading objectives.
The best platform to trade Facebook should provide the complete set of tools to analyse its stock and is easy to use. You should also check all commissions and fees associated with trading, making sure to thoroughly read the terms and conditions.
The trading hours for Facebook stock are from 9:30 A.M. to 4:00 P.M. (ET).
Facebook is listed on NASDAQ.