Social media giant Facebook (FB) rose 8.2% to close at $134.18 on December 26. Facebook stock has generated returns of -24% since the start of 2018. It has fallen close to 18% since October and has slipped 4.6% this month. The stock has generated returns of 27% in the last three years and 147% in the last five years.
Out of the 44 analysts covering Facebook, 41 recommend a “buy,” two recommend a “hold,” and one recommends a “sell.” The average 12-month stock price target for Facebook is $187, indicating an upside potential of 39% from current levels. Though there are concerns over declining advertising revenue and privacy issues for Facebook, the company’s growth story is far from over.
Facebook’s sales are expected to rise by 36% to $55.36 billion in 2018 and 24.4% to $68.9 billion in 2019. Sales might further rise by 21% to $83.35 billion in 2020. The company’s earnings per share are expected to rise by 37% in 2018 and then rise by 1% in 2019.
Facebook’s EPS are expected to rise at a CAGR (compounded annual growth rate) of 18% over the next five years compared to the annual gain of 52% in the last five years.
Given its revenue and earnings growth, FB’s forward 2018 price-to-earnings ratio of 16.8x indicates that the company is undervalued.