Facebook Up 300% From IPO Price

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Facebook Inc.’s (NYSE: FB) initial public offering struggled out of the gate on May 18, 2012. With its price set at $38, it closed at only $38.23 at the end of that day. It dipped for several days after that. However, the early debacle is now a very distant memory. Facebook’s shares are up about 300% from the first day of trading to $152.78 as of Tuesday’s close. Its market cap is $442.4 billion, which places it sixth among all publicly traded companies.

The two things driving the company’s huge run are its user numbers and rapid revenue growth. It also has helped that Facebook is very profitable. In 2010, Facebook’s revenue was $2 billion, and its net income $606 million. In 2016, revenue reached $27.6 billion and net income was $10.2 billion. EPS has moved from $0.49 to $3.56 over the same period.

Lumped together with Alphabet Inc. (NASDAQ: GOOGL), the two companies accounted for 20% of total global advertising spend in 2016. That’s $106.3 billion of a total ad spend last year of $532 billion. And that number is expected to grow in 2017.

At the end of last year, Facebook had 1.86 billion monthly active users, an important metric for the social media sector. Research firm Internet Live Statistics claims the current Facebook count is just shy of 1.9 billion, which means it could top 2 billion by midyear.

A byproduct of Facebook’s size it that it is part of what ad industry executives call the internet advertising duopoly. The Financial Times in March reported:

Google and Facebook will extend their dominance of digital advertising this year to control 60 per cent of the growing market, according to a new forecast from eMarketer.

US digital ad spending will grow 16 per cent to $83bn, the research group projected, as Google’s revenues rise 15 per cent and Facebook’s increase 32 per cent.

Facebook is set to release its most recent quarterly results after markets close Wednesday. The consensus estimates call for $1.12 in earnings per share (EPS) and $7.83 billion in revenue. In the same period of last year, Facebook posted EPS of $0.77 and revenues of $5.38 billion. That’s expected EPS growth of 45% and nearly 46% growth in revenue.