3 Reasons to Own Facebook Stock in Retirement

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published 1 February 2017

Retirees may spend hours a day on Facebook, but its stock, lacking a dividend, is often overlooked when it comes to their portfolios. Facebook (symbol FB, $132.78) may not hand out cash every quarter, but it can still be a good retirement stock. It trades at an attractive price and is expected to generate well-above-average profit growth. It enjoys a large and entrenched position in the digital advertising industry, which is expanding rapidly. And it has various businesses that have yet to reach their full potential, analysts say. Here are three reasons Facebook stock looks like a winner for retirees.

Disclaimer

(Prices are as of January 26. Estimates and other figures are from Zacks Investment Research, unless otherwise indicated.)

The Price Is Right

Facebook looks like a bargain. The stock trades at 25 times expected earnings for 2017, according to Zacks Investment Research. That seems high until you consider that those estimates put 2017 earnings 28% above 2016 levels. And profits are forecast to increase 30% a year on average for the next three to five years, according to Zacks.

Facebook is not without risk, but investors who take the plunge now are getting a deal, says Credit Suisse analyst Stephen Ju. "We believe Facebook shares are mispriced,” he says.

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A Stalwart in a Growing Industry

Facebook is the most popular social media network in the world. It has 1.8 billion active monthly users. Advertisers are keen to reach all those eyeballs. Market researcher eMarketer estimates that Facebook takes in 68% of all revenue generated by global spending on social media advertising. Spending in this part of the ad industry is projected to rise from $29 billion today to $50 billion by the end of 2019, or about 20% annualized, according to an analysis by Zenith Media.

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More Than Meets the Eye

Facebook is more than its signature website. It also owns Instagram, the increasingly popular photo-sharing platform, and mobile instant-messaging apps WhatsApp and Messenger. And it owns Oculus, a virtual reality company. Credit Suisse's Ju contends that the market does not yet appreciate the profit potential from these and other endeavors. Wall Street analysts “continue to underestimate the long-term monetization potential of upcoming new products," he says.

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Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.