Buy Shares of Facebook to Reap the Rewards of Zuckerberg's Vision
Some stocks are high-risk, high-reward picks in which investors could make a killing in the short term but could also lose their shirts.
But when investing long-term capital that is planned for retirement, investors need to find a way to guarantee returns.
Everyone knows that Silicon Valley is where some of the most dynamic and profitable American companies can be found. But even in this rarefied group, Facebook (FB) - Get Report has emerged as a clear leader, and it has a vision for the future that should keep rewarding investors.
More than 1 billion people around the world are active Facebook users. The comparable figures for social-media rival Twitter is 320 million.
Facebook's acquisition of the increasingly popular Instagram application in 2012 has proved to be a very smart move.
The company has become a part of the fabric of everyday life to a greater degree than anything since the advent of the Internet itself. Mark Zuckerberg, Facebook's founder, may still be walking around in a hoodie, but his net worth is approaching $45 billion, placing him behind only Microsoft's Bill Gates, Berkshire Hathaway's Warren E. Buffett and Amazon's Jeff Bezos on the list of richest Americans.
What about Alphabet, which competes with Facebook for advertising dollars? Both Silicon Valley giants will report second-quarter results later this month.
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Analysts forecast that Facebook's profits will grow by more than 60%, while Alphabet's gain will be more in the range of 10% to 20%.
Facebook's earnings were already quite healthy, which is one reason that the stock's price has recently surpassed its 50-day moving average.
In April, the company reported first-quarter revenue of more than $5 billion and earnings of 77 cents a share. That earnings figure was about 10% greater than the highest forecast by a group of Wall Street analysts.
The stock price jumped by about 9% after earnings were released.
If Facebook exceeds expectations again when it reports second-quarter results on July 27, the stock price could jump again.
But the company isn't resting on its laurels. Quite the contrary, as it is taking steps to guarantee future profits.
As the world increasingly moves toward a future based on cloud computing, Facebook continues to invest in its cloud infrastructure to meet existing and growing global demand.
To that end, Facebook and Microsoft are teaming up to build a state-of-the-art sub-sea cable across the Atlantic. The new cable will help meet growing customer demand for high-speed, reliable connections for cloud and online services for Facebook, Microsoft and their customers.
The two technology titans designed the new cable to be inter-operable with a variety of networking equipment. This new open design brings significant benefits for customers: lower costs and easier equipment upgrades, which lead to faster growth in bandwidth rates because the system can evolve at the pace of optical technology innovation.
Zuckerberg said recently that Facebook has "a 10-year road map to give everyone in the world the power to share anything they want with anyone."
Considering what he and his team have achieved already, they may get there sooner than that.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.