Facebook share price history: will it repeat itself again this decade?
10:23, 4 March 2020
Founded in 2004, Facebook (FB) has become the world’s largest social media firm. It is also the world’s fifth largest company based on its market capitalisation of $562bn.
Its market cap is significantly higher than its closest competitors, such as Twitter (TWTR), Snapchat (SNAP) and LinkedIn, now owned by Microsoft (MSFT). But it still lags slightly behind Alphabet (GOOGL), its main rival in the battle for dominance in the online ad market.
Faceboo share history suggests massive returns for investors ever since the company went public in 2012 via initial public offering with a share price of $38. If one had invested in Facebook stock price at the time of IPO in 2012, the investment will have increased by more than 566 per cent, outperforming the 139 per cent growth of the tech-heavy NASDAQ index during the same period.
Let us first discuss the drivers behind the success of Facebook share performance before diving deeper into Facebook valuations, financials and future fundamentals.
How did Facebook become so big and influential?
Facebook has experienced controversies since its inception. Whatever happened on the regulatory front, the social media network grew sharply year on year; the site was used by more than 2.5bn people around the world by the end of 2019. It has become an integral part of the daily online lives of billions of people around the world. But, how did the social media empire start?
The social media company had generated annual profit of $1bn prior to listing on stock exchange. The company held an initial public offering on May 18, 2012. It raised more than $16bn, making it the largest IPO in history at that time.
Along with investment in innovation and organic growth opportunities, Facebook invested billions of dollars in expanding their reach and global presence through acquisitions. It has made several acquisitions in the past eight years. For instance, it bought Instagram and Atlas in 2012 along with WhatsApp and Oculus in 2014, for $19bn and $2bn respectively.
It has also made several changes to its user’s privacy and data policy in order to comply with regulatory guidelines. In 2018 its annual profits stood at around $22bn falling to $18bn the next year.
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Facebook historical share price performance
The Facebook share price graph shows that it had experienced significant volatility during the first year of trading. Facebook shares plunged more than 50 per cent in the months following the IPO, with the company taking almost a year to reverse these losses and return to its initial IPO price. Investors were concerned that FB share price was overpriced and the business was not in a position to generate massive ad revenue growth. Lawsuits had also played a role in generating volatility in FB stock price after IPO.
As shown in the Facebook share price history chart, the stock started shining from the second half of 2013 onwards, due to the company’s aggressive growth strategy and improvement in the number of active users. As well as acquisitions the company strengthened its news feed feature and improved its regulatory compliance. A marked acceleration in ad revenue also played a key role in improving investor sentiment.
Despite a struggling start as indicated by Facebook share price history graph, Facebook stock has outperformed the broader market index every year except 2018. The share price received support from average revenue growth of 44 per cent in the past five years.
The company’s earnings growth of 42.5 per cent in the past five years indicates healthy margins, thanks to operational efficiencies and a focus on high margin ad revenues. At the end of the 2019 fiscal year, advertising accounted for more than 90 per cent of its overall revenue.
Facebook stock value history also highlights a big downside swing during 2018. The downward trend was mostly blamed on issues related to regulation and a major data breach controversy.
A significant political and data breach scandal emerged in early 2018 when it was revealed that a firm called Cambridge Analytica had harvested the personal data of millions of people without their consent and used it for political advertising purposes. Facebook chief executive officer Zuckerberg has since sought to reassure European and US lawmakers of the company’s commitment to adhering to regulatory guidelines.
Facebook since complied with the General Data Protection Regulation (GDPR), a new privacy and data collection law that came into effect in Europe in 2018.
According to FB stock history, the share price again started surging at the beginning of last year due to regulatory compliance along with strong financial numbers and growth in user base of its family of apps, which now includes the Facebook app, Facebook Messenger, Instagram and WhatsApp. The FB stock price graph highlights a 56 per cent rally in 2019. The robust FB stock price performance in 2019 helped it in reaching the highest level of $224 at the beginning of 2020.
What factors drive the price of Facebook stock today?
After surging to an all-time high at the beginning of 2020, as Facebook stock price chart shows the company has witnessed a downtrend in the past week. However, the latest decline in FB shares is mainly a result of the broader market uncertainty caused by the coronavirus and general concerns of a global economic slowdown.
Some market analysts are predicting significant gains in the coming days as central banks rush to reassure markets. With a practical duopoly of the online advertising revenue market enjoyed by Facebook and Alphabet, the company could see a strong rebound in the coming days and weeks, thanks to its solid fundamentals. The investment firm Stifel, for example, has provided a price target of $250 per share, while Morgan Stanley is even more bullish with a price target of $270.
Bottom Line: Facebook share price history will repeat itself again this decade
Facebook stock history since IPO is full of strong performance. The FB shares chart shows a growth of more than 566 per cent on its initial price of $38 a share. Several catalysts are likely to back FB stock performance in the weeks to come. These catalysts include a massive growth in its user base, online ad revenues and financial fundamentals. Moreover, the Facebook stock price history chart shows that it has the potential to overcome short-term headwinds.
Read more: Facebook stock history: a closer look at the tech giant’s performance on the verge of 2019
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