Monday's broad-based rally sent the S&P 500 Index to an intraday record and also helped push Facebook Inc. (Nasdaq: FB) stock to an all-time high of $70.92.
Shares of the social networking giant climbed 3.4%, or 2.33 points, to the new high. Volume was heavy, with 76.63 million shares changing hands - compared to FB's average daily volume of 63 million shares.
Markets got a lift Monday from deal making on Wall Street and improved economic news out of Europe. But the real catalyst propelling FB stock to its record close was fresh backing of its recent WhatsApp purchase, and a changed perception of Facebook as an investment.
Last Wednesday, FB plunked down a whopping $19 billion to buy the rapidly growing mobile messaging app that boasts some 450 million monthly users and is adding more than 1 million users daily.
Initial reactions to the hefty WhatsApp price tag were filled with skepticism. Critics were quick to comment that Facebook Chief Executive Officer Mark Zuckerberg is willing to go to any lengths (and price) to remain the dominant social networking player and is buying up the competition.
But upon further review, even skeptical analysts changed their tune.
With this acquisition, Facebook now dominates the global market when we calculate the amount of time spent by individual consumers on their cell phones. Between the Facebook homepage, Instagram, and WhatsApp, the company now has three of the top five applications by consumer time spent per day.
Some even called the WhatsApp purchase a bargain.
The total paid for WhatsApp - $19 billion - means each user costs $42.22. That's lower than the per-user price on most other social Internet sites.
According to USA Today research, if you take each of the following companies' current market capitalization divided by user, you'll get the following per-user prices:
- $53.19 for online urban guide Yelp Inc. (NYSE: YELP)
- $84 for professional networking site LinkedIn Corp. (NYSE: LNKD)
- $126.39 for microblogging site Twitter Inc. (NYSE: TWTR)
- $409.85 for crowd-sourcing review site Angie's List Inc. (Nasdaq: ANGI)
- $749.14 for Internet search giant Google Inc. (Nasdaq: GOOG)
But it's not just the good deal of buying WhatsApp that's giving FB stock this upward momentum...
Facebook Stock Is a Whole Different Investment Than Before
Facebook looks a lot different today than when it went public on May 18, 2012.
The FB initial public offering was a fiasco, and insiders were quick to sell in the months that followed as lock-ups expired. Additionally, FB's lacking mobile presence was a big concern.
Now a 10-year-old social network with 1.2 billion global users, FB is evolving into its own:
- The social networking giant has figured out how to monetize mobile. Q4 2013 earnings showed a 63% year-over-year revenue increase, with more than half coming from mobile, up from 0% of revenue from mobile in its first-ever quarter.
- Facebook has a good sense for deals. The Menlo Park, Calif.-headquartered company has found value and strategic fits to enhance its mobile platform and mobile usage with purchases such as Instagram and WhatsApp.
- Facebook is aware of increasing user engagement. The site has added things like Graph Search, Wish List, Newsfeeds, and Paid to Post. It has also expanded tie-ups with hundreds of e-commerce sites.
- Facebook is still growing. CEO Mark Zuckerberg has shown Wall Street he is serious about building things and that he remains committed to connecting the world via Facebook. The WhatsApp purchase, with sizable international following, furthers that mission.
Facebook stock more than doubled last year. The stock is up some 25% year to date, far surpassing returns of the three major benchmark so far in 2014: The Dow is down 2.2%, the S&P 500 is off 0.04%, and the Nasdaq is up 2.8%.
FB shares faded some Tuesday, slipping less than 1%. At last check, shares were changing hands at $70.19.
Up next: Tesla stock has been on a tear this year, up 69% in 2014 and up 665% since the start of 2013. But Tesla's "Gigafactory" could really send its stock through the roof...
Facebook to Buy Messaging App WhatsApp for $19 Billion
Facebook, Telsa, Google Close at Record Highs
The Wall Street Journal:
S&P 500 Just Shy of Record Closing High