Let’s get right to it: buying Facebook stock means investing in one of the most successful companies in history. Sounds good, right? The more important question is whether this giant is going to deliver good returns for you.
So what are the potential benefits of buying stock in an established player like Facebook? Here, we cover all the information you need to know to decide if the investment is worth it.
History of Facebook
The myth is that Mark Zuckerberg created Facebook ‘a way to meet girls’. This isn’t strictly true. But whatever the origin story, it grew into the world’s leading social media platform over the years that followed. As of February 2021, it boasts 2.8bn monthly active users.
Facebook started life as TheFacebook, and the platform was exclusive to Harvard students. But by 2004, the site had gained 1 million users. In 2006, rebranding to the simplified ‘Facebook’ and allowing anyone to register led to its boom.
Within three years of this decision, the site had 350 million users. Another three years on, it had reached a billion active users. No other website had ever achieved this.
Stock Price History
On May 18, 2012, Facebook made its initial public offering (IPO), with stocks offered at $38 per share.
The price shot up not long after and has seen some heavy fluctuations over the years. As a social media giant, Facebook faces intense scrutiny for its behavior, which is the reason behind most of the rapid drops in price.
However, the Facebook stock price has generally followed a path of consistent growth. In March 2021, the Facebook stock price sits at just over $280 per stock, which is a massive increase over the nine years since the IPO.
As recently as two months prior, the shares were as low as around $250 per stock, while in March 2020, stocks were below $150.
The strong pattern of growth suggests that it is a reasonably safe bet for purchasing stock options. On the other hand, potential investors should perhaps consider waiting for a slump before purchasing shares. They can safely bank on another subsequent return to strong performance, so the wait is worthwhile.
Dividends
If you were savvy enough to wait for prices to drop and spent $1,000 on Facebook stock after its IPO, how much would you have? The stock swiftly dropped below $20 per share, and if you’d chosen this moment, you would have over $14,000 if you cashed out during January 2021.
It is an excellent rate of return for less than a decade. It’s not quite the ‘what if you had bought Apple stock in 1980’ legend, but it shows that Facebook has had a lot to offer investors over the years.
The company’s ability to recover from negative press is also a plus in this sense. While the share price has seen some sharp falls over the years, it has always recovered.
Interesting Facts
- Although Facebook is in the U.S., over 90% of its daily active users are from other countries.
- The political conservative/liberal divide on the platform is only 1% — its user base is highly diverse
- A 2018 U.S. survey found that 3% of marketers operate on Facebook.
- Facebook has an unparalleled cache of social data, which makes it attractive to marketers
Bottom Line
Buying Facebook stock will set you back more per share than most. However, you get a strong promise of seeing a good return on your money compared to many companies.
Remember: the first place you’ll hear about Facebook’s share prices falling is your Facebook homepage, so keep your app open and get ready to take advantage of the dip!
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