Facebook Stock, Share Price and Investing Information – Focus on US Stock Market Today
A desktop, boredom, and some nifty hacking skills were all it took Mark Zuckerberg to lay the foundations for the most popular social networking site on the internet. From its humble beginnings as a Harvard-only website, the platform now boasts over 2.8 billion worldwide followers, with a stock market presence to show for it.
Here’s all you need to know before investing in Facebook’s stock:
Facebook Inc was founded by Mark Zuckerberg, Dustin Moskovitz, Chris R. Hughes, Andrew McCollum, and Eduardo P. Saverin in 2004. Eventually, the private entity’s social media website became such a hit that it decided to go public on February 1st, 2012.
The tech conglomerate’s IPO is the biggest ever in technology and internet history and has since enabled Facebook to be one of the Big Five companies in the IT industry, known acrimoniously as FAANG (Facebook, Amazon, Apple, Netflix, and Google).
Since going public, Facebook has vastly expanded its range of services beyond its namesake site – acquiring other popular social media applications such as Instagram, Onavo, WhatsApp, and Giphy.
It has also had a notorious past with the law – the company has been slapped with several lawsuits from public and private entities for copyright infringement, violation of anti-trust policies, and aggressively hindering competition.
However, such political action hasn’t hindered Facebook, which currently has an accelerating market price and continues to be an investor favorite due to its enormous growth potential.
Facebook Management Team
Facebook’s Board of Directors (BOD) runs a tight, well-knit ship – the management team has remained more or less the same since its inception.
The company is spearheaded by the young tech-billionaire, CEO Mark Zuckerberg, with Sheryl Sandberg serving as COO/Director and David Wehner as the CFO.
Even though Zuckerberg was hesitant about taking the company public, he finally gave in when its shareholding grew to 500 stockholders, a number too significant for a private entity to sustain.
The underwriting syndicate headed by Morgan Stanley (MS) initially decided on a Facebook share price of $38, leading to a colossal market capitalization of $104 billion, the greatest ever valuation for an IPO.
Demand for Facebook’s growth stock was so high that the underwriters added 25% more shares to the IPO than initially allotted, further boosting its stock price expectations. The stock ended its first day of trading on NASDAQ at $38.23 a share, breaking the record for the highest ever trading volume of an IPO.
What is NASDAQ?
Like other technology companies, Facebook chose NASDAQ as the platform for its IPO instead of the NYSE.
The New York Stock Exchange (NYSE) is the world’s largest stock exchange by market capitalization of the listed companies, standing at US$22.9 trillion in 2019. However, the Nasdaq stock market is home to over 3300 listings and boasts growth stocks with substantial growth potential, offering long-term investors greater capital gain returns.
The Nasdaq composite index, which includes almost all the stocks listed on the exchange, is one of the most widely followed stock market indices in the US by both small and large investors. Additionally, the Nasdaq 100 index was introduced by the exchange to enable investors with high return portfolios to track large-cap growth companies.
Being one of the most valuable companies globally, Facebook currently holds the 6th rank in the prestigious Nasdaq Index 100. This is an impressive feat since the index is treated as the benchmark of technology sector health.
Besides the exchange’s stock market, it also operates a very popular options market, dealing in financial instruments such as swaps and futures used to hedge risk. Nasdaq futures help investors control the risk associated with different securities of the Nasdaq stock market index.
For example, investors could choose to buy call options with Facebook stock as the underlying asset if they speculate that prices will rise in the future. That way, they would lock in a lower price for themselves and eliminate market risk.
Facebook’s Nasdaq composite share price has seen overall growth since its IPO in 2012, even though it is volatile and faces occasional plunges and highs.
The dips come about due to its lawsuits and other regulatory constraints, such as the concerns raised in Congress regarding user privacy. The stock price has also surged in the past, mostly due to Facebook’s incredibly successful mergers and acquisitions – the most notable being that of WhatsApp.
Facebook’s share prices rocketed upon the acquisition announcement, going from $68 to $77.56 by the time the merger attained regulatory approval.
Facebook Stock Price Today
As of March 1st, 2021, the Facebook stock is trading for $257.62 per share at Nasdaq, with a market cap of $733.62 billion. It has a high P/E multiple of 25.53, indicating the high growth expectations attached to the stock.
What you Need to Know before Investing in Facebook Stock
Before adding Facebook stock to your portfolio, it is essential to note the stock’s characteristics and reconciling them with your own risk and return objectives.
1. Facebook Shares require a Substantial Investment
With a single share trading at well above $250, Facebook isn’t like value or penny stocks you can put your funds in and not worry about. The investment requires a large upfront capital infusion. So, it’s essential to understand the stock’s expected return, the systematic risk associated with the tech industry, and the company-specific risk affecting its price.
2. Facebook stock is Volatile
With a beta of 1.26, the Facebook stock carries immense market volatility. This is typical for high growth stocks operating in rapidly changing industries, such as the IT sector. This isn’t a negative sign, as the company maintains an upward trajectory even through hard-hitting economic recessions.
The stock’s volatility can make trading in Nasdaq futures highly lucrative for an investor with a keen sense of price speculation. Moreover, if you are a long-term investor comfortable with locking in funds for years instead of a day trader looking to make short-term profits, Facebook is an ideal choice of investment.
3. Facebook doesn’t pay dividends
As is typical of growth stocks, Facebook Inc doesn’t pay dividends and instead reinvests profits into the company’s R&D and expansionary efforts.
If you’re on the lookout for high dividend yield stocks, Facebook would be a disappointing addition to your portfolio. It is better suited to more risk-moderate investors in search of substantial capital gains.
Should I Invest in Facebook Stock?
At the end of the day, any investment decision depends on your risk appetite and required return. Facebook is a growth stock that has historically shown massive capital gains due to its high revenue growth and successful expansionary endeavors.
The market environment and current bond yields can also tell you if investing in the stock market at all is a good idea. In a bullish market indicative of a boom, investments can return substantive gains.
If you’re still unsure about adding Facebook to your investment portfolio, reach out to a financial broker or analyst to understand your optimum risk level better and the stock’s future expectations.