Facebook (NASDAQ:FB) has almost hit a $1tr market capitalisation, potentially securing its position as one of the most valuable companies on the S&P 500 index. The Facebook stock price is trading at $350, reporting a whopping 25% year-to-date increase. However, this performance is the minimum I would expect from the social media giant. 

Let’s take a closer look at how this business has been performing. And whether I should consider adding Facebook stock to my portfolio.

Developments backing the bullish journey of Facebook stock

The firm has been staying ahead of its game for a while now. And thanks to the continuous developments and innovations achieved, the Facebook stock price has been growing. 

The recent introduction of Reels within the US market is creating quite a buzz. Reels is a competing app to the widely popular TikTok. It allows users to create and edit 15-second videos and share them with their friends and followers. The platform is directly connected to Instagram and enables existing profiles to share and connect with followers more easily. 

Meanwhile, Facebook Shop is progressing quickly. This extension of the Facebook platform provides an online retail solution for businesses. Since its launch in May last year, more than 1.2 million online stores have been set up, with an average of 300 million monthly shoppers.

That’s very impressive in my eyes, and I applaud the management team’s prudent decision to open new avenues of revenue generation through e-commerce.

Quarterly Earnings Report- Highlights

The company reported strong financial performance at the end of the year 2020. The growth momentum continued in Q1 2021, with the social media giant reporting a revenue of $25 billion. With a massive 46% increase year-to-year in ad revenue, the earnings per share have almost doubled, reaching $3.31.

The social media company increased their price per ad by approximately 30%, leading to a 46% increase in year-to-year ad revenue. Nonetheless, CEO Mark Zuckerberg’s vision about his company has translated well in the form of robust financial performance. And so, I’m not surprised to see the Facebook stock price soaring. But can it continue to deliver these impressive results?

Future risks

Despite its financial achievements, Facebook and other big tech companies are under increasing pressure from regulatory authorities. The recent anti-trust lawsuit of the company by the Federal Trade Commission was recently ruled in favour of the company. This is undoubtedly good news. But the threat of an amended complaint continues to be a severe threat in my mind.

In addition to this, the change in tax rates on international profits under the Biden government is likely to adversely impact performance in the coming months. Although, changing tax codes rarely leads to significant long-term problems in my experience.

Another more pressing matter is the latest release of Apple‘s iOS 14.5 update. This version of the operating system for all iPhones limits the data that can be collected by Facebook. For consumers, this certainly improves the level of their individual privacy. However, for Facebook, this is quite problematic. After all, the company uses this data to target relevant adverts to users.

Mr Zuckerburg has been quite positive about the changes. He believes that Facebook’s ad revenue-generating capabilities will still be able to grow. However, I’ll be watching closely to see how much of an impact this change in data collection capacity will affect income.

Concluding remarks about Facebook stock

While these risks remain pretty significant, I agree with Morgan Stanley’s Analysts opinion about Facebook’s stock price potential. Therefore I would still consider adding some shares to my growth portfolio as a long-term investment.