Facebook Inc (FB): What Is Driving The Stock

facebookTara Clarke:  Facebook stock (NASDAQ:FB) is up 117% since its May 25, 2012, IPO. The social media king has crushed Nasdaq returns by 54% since the debut, and by 26.79% last year alone.

What’s fueling Facebook’s generation of a $231 billion market cap?

For one thing, FB’s user base is massive – and continues to grow. The firm has more monthly active users (MAUs) than any other social media company at 1.39 billion (and 1.19 billion on mobile).

FB earnings

For another, it figured out how to monetize through advertising. In the most recent Facebook earnings, ad revenue rose from $2.9 billion to $3.5 billion in only one quarter.

But user growth and ad success are just two of the puzzle pieces within a larger strategy – one that’s helped propel FB stock from $38 a share to nearly $85 a share and morphed Facebook into the biggest social media network in the world.

The Single Strategy That Doubled Facebook Stock (Nasdaq: FB)

Money Morning Capital Wave Strategist Shah Gilani knew, even when Facebook stock fell below $20 a share in late 2012, the company had tremendous promise.

“Every time I look at, or think about, what Facebook is doing strategically, I can’t help but get excited – feeling as if this is a chance to buy a really good stock at a really good price point,” Gilani said nearly a year ago today in April 2014.

The strategy Gilani was talking about back then is one the company still holds fast to now: growth and dominance through the right mergers and acquisitions.

Facebook has bought 49 companies in the last five years.

0415_Facebook-Mid

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Already in 2015, Facebook has picked up three more in tech M&A deals: speech recognition software Wit.ai on Jan. 6, video compression company Quickfire on Jan. 8, and e-commerce firm TheFind on March 14.

But the key behind FB’s M&A strategy isn’t just to purchase a lot of smaller companies willy-nilly – it’s buying the right firms.

Gilani knew he liked Facebook’s M&A strategy when Founder and CEO Mark Zuckerberg had this to say after FB bought Oculus, a virtual reality tech firm, on March 25, 2014.

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