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Why There’s Little to Fear in Facebook’s Stock

Mark Zuckerberg , FacebookMark Zuckerberg , Facebook

As tech behemoth Facebook continues to barrel through Wall Street expectations quarter after quarter, investors must ask: Can the aging company maintain its momentum?

Clamp down on your doubts, wrote Barron’s columnist Jack Hough in a Sunday report. It’s time to buy into the tech giant trading at roughly $124 per share. Facebook (FB) has sustained growth on strong mobile ad revenue, and it is equipped to continue doing so.

While most companies should be struggling up the hill at this point in their life cycle, the 12-year-old company’s growth has quickened. Revenue grew 56% year-over-year during the first half of this year, an uptick from its 40% growth the same period a year earlier.

Earlier this year, Facebook fanned worries about growth during a robust second quarter earnings call, when it revealed that revenue growth is likely to slow over coming quarters as the company hits its maximum ad load—the number of ads it can serve to users without driving them away. But Barron’s notes that Facebook has acquired other platforms where it still has ad space: Instagram, Messenger, and Whatsapp—though those are areas that are still figuring out how to monetize.

Management’s decision to limit ads on its its namesake platform, Facebook, should also help moderate another major worry among investors: Facebook’s user base. By curbing ad load, Facebook should limit user annoyance and grow its user base from 1.1 billion active per day to Wall Street’s consensus of 1.7 billion in four years.

 

Within 12 months, Facebook shares could rise another 20%, Barron’s estimates—about the same as Wall Street consensus, which expects the stock to rise to $155 a share. Most Wall Street firms also place the stock as a “Buy.”

“Of course there’s no guarantee Facebook will meet expectations, but the list of reasons for doubt is dwindling,” Hough wrote.