Facebook Inc: The Case for $100 a Share

As Facebook (NASDAQ: FB  ) inches ever closer to $70 a share, with its 52-week high of $72.59 on the horizon, some shareholders may be getting a bit antsy. After all, Facebook's stock price has hardly rocketed up, it's been slowly but steadily climbing. And that's just as it should be. It didn't take long for Facebook to transition from a high-flying, wildly fluctuating stock -- think Twitter (NYSE: TWTR  ) but fundamentally sound -- to what it is now: an excellent, long-term prospect for most any portfolio in need of growth.

Facebook's steady improvement should also be comforting for mid and long-term investors because it's not based on rumors, speculation, or other short-term stimulus. There's a sound basis for Facebook's recent gains -- it's up about 11% the past month, and 24% year-to-date -- and no reason to think it will change, other than the usual market-incited "blip" here and there. Which begs the question, can Facebook hit $100 a share?

Way back when
It's now hard to imagine users not accessing Facebook via their mobile devices, but looking back at Facebook's inaugural earnings report about this time two years ago, demonstrates the forethought and execution of Chief Executive Officer Mark Zuckerberg's all-things mobile strategy. Go back another year, to 2011, and Facebook's transformation to a mobile, social media dynamo is even more impressive.

In the June 2011 period, 40% of Facebook's monthly average users, or MAUs, accessed the site via their mobile device. By the following year, that figure jumped to 543 million mobile users out of Facebook's total of 955 million, or 57%. At the time, surpassing 50% of Facebook's user base with mobile was a watershed moment, particularly after going on record saying, "We're going to become a mobile company."

Not surprisingly, Facebook revenues, earnings, and every other financial measure have since skyrocketed. But it's Facebook's mobile success, and its ability to take on such a huge undertaking, and do it so well, that bodes well for its future. Today over 80% of Facebook's 1.28 billion users are mobile, and generate 59% of its total advertising revenues. That's almost twice 2013's 30% mobile ad revenue share, and you can expect the trend to continue.

Twitter is in its own "way back when" stage right now, though it's difficult to see where it's going to find the type of growth Facebook fans have come to take for granted. With a mere 255 million users worldwide, Twitter has about half the number of users as WhatsApp's 500 million plus, and counting. Yet, Twitter is sitting on a market value approaching $24 billion, while Facebook was able to "steal" WhatsApp for a paltry $19 billion.

Considering Twitter is still in the early stages of monetizing its service, it already suffers from slowing user growth, and faces stiff competition from services like WhatsApp. So how did Twitter find itself with that lofty valuation? Likely, by riding Facebook's coattails, because it certainly isn't based on fundamentals.

The next two years
By virtually any measure, Facebook has had an extremely solid past two years. Naturally, that doesn't mean all was rosy, all the time, as Facebook fans can attest after seeing its stock price plummet for reasons including lack of mobile users and monetization concerns. Now that Zuckerberg can check mobile of the list of Facebook shortcomings, there are significant means of growth waiting in the wings.

Even before Facebook is able to incorporate the aforementioned WhatsApp and virtual reality headgear manufacturer Oculus into its suite of services, investors can expect to see video ads across Facebook, Instagram, Messenger, and who knows what else Zuckerberg has up his sleeve. The revenue potential of video is enormous, and Facebook's social properties -- Facebook itself, Messenger, WhatsApp, and Instagram -- are dominant and nearly ready to begin impacting the bottom line.

Final Foolish thoughts
Lest we forget Facebook's recent targeting of small businesses, corralling app developers at its F8 conference to generate additional gaming and app download revenues, and drones to bring the Internet to under-served markets around the world. There are also rumors Facebook is in the midst of developing an enterprise, work-related platform. Wouldn't that be an intriguing concept?

If you look at where Facebook was just two short years ago, consider where it is today, and then factor in the expanding list of growth possibilities to jump-start Facebook's next two years, it's not matter of if Facebook hits $100 a share, it's when.

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