Do you know how many Facebook users are there in the world? 2.8 billion! That 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. And if you're ever curious about how you can profit as an investor, then this page will be your guide. Here you'll learn everything you need to know about investing in this company.
Table of Contents
Learn How to Buy Facebook Stocks in 3 Easy Steps
Find a broker
You need to find a broker that will provide you the trading platform to start investing or trading Facebook stocks.
Analyze Facebook's chart
On your platform, you'll find a variety of analytical tools that will help you understand Facebook's stock price and what's the best strategy to trade it.
Finally, when you've done your analysis, place your first trade and monitor your position's performance.
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.
Facebook is best known for operating the largest social networking service of the same name. It's based in Menlo Park, California, and was founded by Mark Zuckerberg in 2004.
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 Business Model and Revenue Streams
Facebook generated $85.97 billion in revenue in 2020, which makes plain how much of a money-making machine the company is. However, those earnings don't come from Facebook alone, but it's sourced from its other social media platforms as well.
Facebook is the owner of another massive social media site, Instagram, and popular messaging app, Whatsapp. It also has a stand-alone Facebook messaging app called Messenger and owns various other third-party affiliated websites or mobile applications.
All of these platforms are gold mines for selling advertising to marketers. And it is this advertisement sales that comprise 98% of its revenue in 2020.
History of Facebook
Facebook, as mentioned, 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 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. And a year later, its total user count grew to 6 million.
By 2006, Facebook opened up to everyone who has a valid email address, and its first taste of profitability was in 2008 after it had gone 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. But the high demand for its shares caused the company to sell 25% more. And 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 acquisition and product development in the subsequent years. It even had some fair shares of legal troubles, with a notable incident involving Cambridge Analytica.
In 2019, Facebook also announced its crypto plans with Libra but got thwarted by regulators over privacy, national security, trading, and monetary policy concerns.
And in 2020, Facebook grew about 34% amid the pandemic.
Brokers That Offer Facebook Shares
Here we named our choices of the best brokers that offer Facebook stocks and other tradable financial instruments. Based on our assessment, we think that 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 7th in the world, Facebook's stock is favored for its long-term power. It's still the social media platform that is head and shoulders above others. And aside from that, its business model 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 further acquisitions and product development.
Facebook Stock Investment Potential
Facebook's stock price has appreciated more than five-fold since the first time its shares traded freely in the open market. It's currently valued at a rather pricey $257 a share price tag, but despite this, the company's controlling position puts it in a good spot where there is likely more upside potential.
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 stock price higher eventually. And Facebook has been spot on in that respect. Facebook is the right stock to buy if you're betting on its long-term prospects and that you trust that the company will make the right decisions about how it manages the billions of 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 for how much your stock is likely to appreciate in the future. You can even use this as a basis for how much funds you'll have exposed in the stock.
But remember, there are still risks that you should consider, and a good rule of thumb is to invest an amount that still leaves plenty left for diversification.
How to Buy Shares in Facebook Stock?
As stated earlier, a brokerage account will be necessary to start trading Facebook shares. So, the first step to take is to get your trading account approved, which will take approximately a few working days.
When you get notified of its approval, you can proceed to fund your account with your broker's available funding methods. The most convenient option is to use electronic transfers as the completion time is usually within a few minutes. Other methods like check or wire transfer can take a few days.
Finally, when your deposit amount is reflected in your account, you can place your first Facebook trade. From there, you need to manage your position and even put funds in other stocks to build your stock portfolio.
Buy Facebook Shares Using a Broker
Now, opening a brokerage account can be overwhelming to some investors. But, in truth, the process is straightforward. All you have to do is fill out a short application form, which would typically ask for some identifying information (e.g., driver's license, Social Security number).
In some cases, the broker may require you to sign certain forms and ask that you provide details about your net worth, employment status, investment objectives, and income. Usually, this happens when you seek other privileges like options trading or the ability to use margin.
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 connect with the company's transfer agent, from which you'll find out more about what the entire cost is for using this investing route.
Of course, one disadvantage of choosing to buy company shares directly is that you don't have flexibility. In other words, you're stuck with one company, offering you zero diversification. It also means that you need to open a separate account for each company you want to invest in, and that is a hectic process.
However, Facebook does state that it doesn't have a direct stock purchase plan at the moment.
Frequently Asked Questions
Analysts estimate that Facebook at $257 a share is still trading below its fair value, which is estimated to be as high as $375.
Facebook has continued to report profits since its shares were available to the open market.
Yes, this is because Facebook moves at an average price of $8.44 a day and its daily trading volume is also 20 billion shares. Therefore, even for short-term trades, there are potential profits to be made.
The best platform to trade Facebook is one that provides the complete set of tools to analyze its stock carefully.
Trading Facebook stocks follow the standard trading hours in the U.S. (9:30 am to 4 pm ET).
Facebook is listed on NASDAQ.