Facebook, Inc. (NASDAQ:FB) a bear market for social media
Revenues have continued to grow at a torrid pace for Facebook in spite of slowing growth in user count and mounting scrutiny. The company’s advertising platform delivered 33% more sales than a year ago during the third quarter of 2018. The problem, though, is that profit margins are shrinking as the company spends heavily on security and updating its services to reflect users’ moves toward more video consumption.
This is made evident in the year-to-date results issued so far.
Falling operating profit margins (not actual profit) is the main cause for the 20% drop in Facebook shares so far. The operating profit margin was actually down to 42% during the third quarter (compared with 50% a year ago), and Facebook expects it to dip into the 30% range over the long term. The fear is that rising expenses could put a cap on earnings in the near future.
The long way home
However, earnings growth still is alive and well despite higher expenses. That is unlikely to change. Facebook expects revenues to decelerate a mid- to high-single-digit percentage rate compared to the third-quarter growth rate. With the third-quarter growth rate at 33%, that still equates to an easy double-digit gain to finish off 2018.
Sales growth will likely come from “stories” and other video content, as building ads into these newer network features is still a work in progress. As Facebook makes that transition, its management believes the company will come out even stronger than ever from higher advertising pricing and user engagement.
That adds up to a pretty good value on what remains a high-octane stock. Forward price to earnings sits at 19.0 — not the cheapest tech giant out there, but a steal if Facebook continues to grow its bottom line north of 20% as forecast. In short, 2018 has been ugly, but this bad year could be buying opportunity for long-term investors looking for a deal.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 162.60.
The projected upper bound is: 152.41.
The projected lower bound is: 134.55.
The projected closing price is: 143.48.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 28.9690. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 39.74. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 48 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -75. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.
Rex Takasugi – TD Profile
FACEBOOK INC A closed down -0.370 at 143.850. Volume was 12% above average (neutral) and Bollinger Bands were 38% narrower than normal.
Open High Low Close Volume___
142.330 144.840 140.830 143.850 30,320,280
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 146.51 155.71 175.04
Volatility: 26 37 46
Volume: 20,676,822 25,055,474 27,776,438
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FACEBOOK INC A is currently 17.8% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of FB.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on FB.O and have had this outlook for the last 39 periods.
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