Top Picks 2017: Facebook

01/06/2017 6:00 am EST


Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

My Top Pick for 2017 is the world’s largest social media company, suggests value investing specialist J. Royden Ward, editor of Cabot Benjamin Graham Value Investor.

Facebook (FB) enables people to connect, share, discover and communicate with each other on mobile devices, personal computers and other electronic gadgets worldwide.

Facebook is led by Mark Zuckerberg, the 32-year-old founder, chairman and CEO of the company.

Facebook recently introduced Marketplace, a place for Facebook users to buy and sell items. Marketplace has launched in four countries and will expand rapidly during the next few months.

Marketplace apps are now available on iPhone and Android devices, but a desktop version will be introduced soon.

Facebook’s third-quarter sales soared 56% and EPS skyrocketed 165% after increases of 59% and 184% in the second quarter. Revenue will likely advance 31% and EPS will jump 40% in 2017.

The company’s current P/E is a hefty 39.4, but the forward P/E, based on next 12 month EPS, is a more reasonable 28.2.

The company is expected to grow earnings at a 32% pace during the next three to five years with more rapid growth expected during the next couple of years.

Facebook is a great company with a proven track record and exceptional management. I expect FB shares will rise 54% and reach my minimum sell price target of $181.03 within 12 to 18 months.

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