Facebook share price forecast 2020 and beyond
What next for the dominant force in social media? The risks and the upside for Facebook’s share price
Love it or hate it, Facebook is the biggest social media player in the world, with 1.62 billion daily active users and a 19 per cent increase in net profits in the year to September 2019. As CEO Mark Zuckerberg attempts to fend off regulators and push forward his proposals for Libra, a cryptocurrency linked to Facebook, what is the Facebook share price forecast for 2020?
A dominant force in social media – Facebook stock analysis
Facebook was founded in 2004 and is headquartered in Menlo Park, California. Its founder, Mark Zuckerberg, attracts admirers and detractors in equal measure.
Despite a torrid 2019 in terms of negative publicity and regulatory controversy, Facebook continues to make good profits for its investors. It owns: the Facebook social media site; Instagram, a community for sharing photos, videos and messages; Messenger, an app that enables people to chat with friends; and WhatsApp, an encrypted messaging service that also enables video calls. It also owns Oculus, a virtual reality hardware and software company which Facebook acquired in 2014.
However, not everyone likes the concept of Facebook’s dominance, or its proposals for self-regulation. Democratic Senator Elizabeth Warren of Massachusetts has been outspoken in her criticism of Facebook and her regulatory proposals would reduce the size of big US tech companies such as Facebook, Amazon and Google. Facebook has also faced opprobrium in the US and UK after details of secret data gathering by the firm Cambridge Analytica, which was found to have harvested personal information in early 2014 to build a system that could profile individual US voters and target them with personalised political advertisements.
Growth in revenues and user numbers
Despite opposition from some politicians, Facebook’s growth has continued and the rise in its user numbers has been better than expected. In its latest results (third quarter to September 30, 2019), it reported daily active users of 1.62 billion, up 9 per cent year-on-year, better than the 1.61 billion that had been expected. Its monthly active users were 2.45 billion, up 8 per cent year-on-year, which was in line with expectations.
The news sent the Facebook share price higher on results day, after beating Wall Street analysts' expectation on both profits and revenues. The shares have held up well, with the closing price on November 29, 2019 at $201.64 (£155.9, €182.6).
So what is the Facebook share price prediction? Historically, the stock has increased from its initial float price of $38 in May 2012 to a high of $202 at the end of November 2019. At its peak on July 24, 2019, it reached a share price of $204.66. A year earlier it reached its all-time high of $209. After positive results for the third quarter, the Facebook share price has been rising steadily. Among analysts the consensus is that the price could reach around $240 next year.
A thriving business?
Despite some very negative publicity over the past few years around secret data collection and the proliferation of political advertising, the bad press has not dented Facebook’s commercial profitability.
Fundamentally, the business is making good returns for shareholders. Its revenues from July to September were $17.65bn, up 29 per cent on the same time period a year ago. Its users grew by 9 per cent annually and its net profits were up 19 per cent year on year to $6.09bn (£4.72bn). The Facebook stock forecast looks positive.
According to CNN Business, analysts view the Facebook stock forecast for 2020 as very positive. It quotes 44 analysts offering 12-month price forecasts for Facebook Inc: together they have a median target of $240.00 for the share price. At the highest end of the scale, the most bullish analysts estimate the Facebook share price could go as high as $330.00. At the other end of the scale, the lowest estimate comes in at $120.00. If the shares rose to $240, the median figure, this would be equivalent to an increase of almost 20 per cent from current valuations.
Buy or hold?
When looking at the Facebook stock analysis, investors look at turnover and net profits. Analysts are generally very positive about the potential growth and profit of Facebook. Their forecasts for Q1 2020 sales range from $18.1bn (£14.03bn) to $19.1bn (£14.8bn). The upcoming reporting date is January 30 2020 for the next quarter’s results.
The current consensus among the 49 polled investment analysts by CNN Business is to buy stock in Facebook Inc. This rating has held steady since November, when it was unchanged from a buy rating. Of the 49 analysts, 40 said the Facebook stock was a buy, three rated it as an outperform, and five said their view was to hold the stock.
In a statement when the third quarter results were published (in October 2019), Zuckerberg said: "We had a good quarter and our community and business continue to grow. We are focused on making progress on major social issues and building new experiences that improve people's lives around the world."
So, what might be the Facebook future stock price?
Facebook predictions vary. While Facebook has suffered from bad publicity over the past two years, its user numbers and profits have been largely unaffected.
Facebook is a component of both the NASDAQ 100 Index and the Standard & Poor's 500 Index (S&P 500) and has a large amount of institutional support. Its shares are held by pension funds, mutual funds, and ETFs as well as private investors, who are all hoping that the Facebook stock price in 2020 will continue to rise.
It had been part of Standard & Poor's Environmental, Social, and Governance (ESG) Index, which tracks socially responsible companies. In June 2019 S&P said it would no longer be part of the index because of concerns over its governance.
Overall, the stock has generated a return of over 300 per cent since its initial public offering in 2012. While it has huge dominance in the social media sphere, its size and reach is now starting to make it a target for regulators and politicians who feel that it is becoming too powerful.
Facebook has dropped back from its July 2018 high amid the general pessimism fuelled about a global economic slowdown, concerns about Facebook’s data collection and the regulatory risk to US big tech stocks. Some analysts question how long Facebook can continue to garner new users and suggest that the Facebook price is destined to fall in 2020.
Facebook has also suffered a blow to its attempts to launch Libra, its own cryptocurrency, after running into problems with regulators In October 2019 and seeing major partners leave the project.
However, the Facebook share price today is still significantly higher than at the beginning of 2019, when it was trading in the range of $140 to $150 per share.
The future of Facebook?
“Facebook still has plenty of irons in the fire with estimates that Instagram could generate nearly $9bn (£7bn) revenue this year (16 per cent of Facebook's estimated sales) and $22bn (£7bn) in sales by 2022,” says Samuel Leach, of Samuel & Co Trading. “The addition of ‘social shopping’ features to Instagram, which has over a billion monthly active users, could help Facebook challenge Amazon.”
Wall Street expects Facebook to grow its earnings at an average rate of 22 per cent over the next five years, Leach says. “Analysts don't offer 10-year estimates, but Facebook's growth momentum should continue as it follows its 10-year growth plan. Reports of Facebook's ‘death’ have been greatly exaggerated, and it could climb much higher over the next ten years.”
The tech sector has outperformed the S&P 500 substantially over the past year. Facebook is a major component and based on the consensus of Wall Street analysts, it offers the prospect of further revenue growth and share price increases over the next 12 months.
FURTHER READING: Facebook Exec: Libra will take decades to roll out