Facebook (NASDAQ:FB) is experiencing rapid growth, sometimes at the expense of user privacy. Governments and regulators are taking notice and taking action, imposing fines, and mandating improvements to privacy and data protection.

Although it's facing headwinds, the opportunities ahead of it are promising enough for investors looking for an excellent tech stock with incredible growth.

An image of a thumbs up icon thats synonomous with Facebook

SOURCE: GETTY IMAGES.

Its ability to gather data

The social networking giant offers advertisers incredibly sophisticated ways to reach a targeted audience. Maybe that's why an estimated 140 million businesses use Facebook's services to reach potential customers. The level of detailed information Facebook knows about its users is unmatched. That data allows marketers to deliver messages to a focused audience, enabling more efficient use of advertising dollars.

The ability to reach a specific set of individuals that Facebook and its portfolio of apps create, gives businesses the capability to generate quality leads, build brand awareness, and close sales -- all with limited wasted advertisements shown to those who would be unlikely customers. 

Incredible Growth

Facebook is growing at a remarkable rate. Over the last three years, it has compounded annual revenue at a rate of 46%. What's even more impressive is achieving this kind of top-line growth while maintaining net profit margins above 25%. The ability to profitably grow revenue is a significant positive to those looking to invest in Facebook.

Top-line and bottom-line growth are forecast to continue next year, increasing 22% and 43% respectively. The top-line increase would be a notable deceleration from the recent three-year rate. Years of profitable growth have built a pristine balance sheet for Facebook, with $52 billion in cash and no debt. The fortress of a balance sheet means it has the money needed to defend its competitive position or to invest in new developments.

Facebook can also use the money for share buybacks, which will give a lift to the stock price. Furthermore, when the investment horizon is long-term, a strong balance sheet increases the chances the business can survive one or more economic downturns.

Additional revenue stream potential

Facebook is gradually integrating its Messenger app into the revenue-generating mix. During the company's most recent conference call, COO Sheryl Sandberg said, "Messaging is one of the fastest-growing areas for online communication -- especially between businesses and people. We've seen businesses use Messenger to reach customers, generate new leads, and even sell cars." Importantly, this demonstrates the value Messenger can provide businesses: the ability to meet customers where they are, rather than waiting for them to come to you.

WhatsApp and Messenger have significant revenue-generating potential. With 1.6 billion and 1.3 billion monthly active users, respectively, turning up the monetization can move the needle for Facebook. 

What this means for investors

The most significant risk Facebook faces is government regulation. Its settlement with the Federal Trade Commission in July 2019 included two significant setbacks. First, the company had to pay a record-setting fine of $5 billion. Secondly, it had to agree to overhaul its privacy protections, which will cause increased expenses for the foreseeable future.

With Facebook, investors can own a company that's growing revenue incredibly fast, with sizable untapped growth capabilities. Admittedly, holding the stock is not without risk. The challenges faced by increased government regulation have the potential to hobble this giant. However, the opportunities ahead justify taking a risk in this tech stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.