Facebook, Inc. (NASDAQ:FB) back in gear again
Facebook (NASDAQ: FB ) stock is back in gear again. Yes, it seems like old times! It’s as if the prior issues and controversies such as with privacy and security breaches have simply just gone away.
The bottom line: For the year so far, the Facebook stock price has clocked a gain of 42%. To put this into perspective, Alphabet (NASDAQ: GOOGL , NASDAQ: GOOG ) is up 12%, Apple (NASDAQ: AAPL ) has gained 22% and Netflix (NASDAQ: NFLX ) has returned 32%.
OK then, what can investors now expect with Facebook stock? Has the move been overdone? Or is there still an opportunity here?
Well, we may not see the same kind of gains. After all, the markets are looking kind of dicey right now.
But then again, I still think FB stock will still do relatively well. If anything, it may be a source of stability in a volatile environment.
So let’s take a look at three key factors for the bull case on Facebook stock:
FB Stock – Barriers To Entry
When Berkshire Hathaway (NYSE: BRK.A , NYSE: BRK.B ) evaluates a stock, it looks for a moat. This is a strong barrier to entry against competitors.
Facebook actually has multiple moats. They include the main Facebook platform, Instagram, Messenger and WhatsApp. In all, these properties have a staggering 2.38 billion users and 2.1 billion use them on a daily basis.
The recent privacy issues have shown just how resilient these apps are. For the most part, users have not really cared much. They generally see that the value of Facebook’s apps as standout. Keep in mind that in the latest quarter the annual growth rate of the user base was 8%.
This is certainly impressive given the scale. What’s more, as seen with other social media operators like Snap (NYSE: SNAP ) and Twitter (NYSE: TWTR) , it’s no easy feat to grow a user base.
So Facebook’s moats position the company to keep getting an out-sized portion of the global ad opportunity.
FB Stock – Growth
Growth continues to be robust. In the latest quarter, FB reported that revenues jumped by 26% to $15.1 billion. There was also $6.4 billion in operating earnings (this excludes the $3 billion reserved for a potential payout for a fine to the Federal Trade Commission). And yes, a key driver has been Instagram. According to Kenshoo, the app saw 44% growth in spending in Q1 .
But there is also a secular trend towards digital advertising. IDC forecasts that the market will go from $229 billion in 2017 to $360 billion by 2021, which is a compound annual growth rate of nearly 11%.
To keep up the growth rate, FB has several important levers. These include WhatsApp and Messenger, which are in the early stages of monetization. Facebook also is exploring entering new categories, such as payments (with a focus on a cryptocurrency) and ecommerce, such as with Instagram Checkout and Marketplace.
True, these are tough markets to crack. But the company has the big-time advantage of a massive user base and a treasure trove of data.
FB Stock – Valuation
Even with the run-up in FB, the valuation remains at a reasonable level. Note that the forward price-to-earnings ratio is at 20X, which represents a discount to the company’s growth ramp.
Wall Street is also getting more bullish. For example, the average price target is $221.50, which assumes about 18% upside from current levels.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 193.64.
The projected lower bound is: 176.51.
The projected closing price is: 185.08.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 27 white candles and 22 black candles for a net of 5 white candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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 56.3295. This is not an overbought or oversold reading. The last signal was a sell 18 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 50.57. 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 sell 10 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 -51. This is not a topping or bottoming area. The last signal was a buy 4 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 10 period(s) ago.
Rex Takasugi – TD Profile
FACEBOOK INC A closed up 2.100 at 184.820. Volume was 59% below average (consolidating) and Bollinger Bands were 22% narrower than normal.
Open High Low Close Volume___
184.570 185.700 183.885 184.820 7,502,820
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 185.49 178.85 161.48
Volatility: 31 30 41
Volume: 13,055,294 16,897,040 22,435,854
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 14.5% above its 200-period moving average and is in an downward trend. Volatility is 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 2 periods.