Facebook, Inc. (NASDAQ:FB) Buy, sell, or hold?
Facebook shareholders have been rewarded handsomely. But does the stock’s valuation still make sense?
The user data concerns that spooked Facebook (NASDAQ:FB) investors earlier this year seem all but forgotten now. The social network’s stock is up 14% since news broke in March about a third party that mishandled user data. Year to date, Facebook stock is up 11% — and that’s on top of a 53% gain in 2017.
Investors are optimistic about Facebook’s future, to say the least.
But has Facebook’s valuation gotten out of hand? The answer may surprise you.
Valuing Facebook stock
Though Facebook may be a high-tech company, there’s no need to stray from traditional valuation methods when analyzing the stock’s current valuation and when estimating what it actually might be worth. In fact, thanks to the company’s strong earnings and free cash flow, traditional valuation metrics such as price-to-free cash flow and price-to-earnings provide investors useful insight into how the market is thinking about Facebook’s growth potential.
A quick glance at these metrics makes it clear that investors expect similar growth over the long haul from both Facebook and Alphabet. However, a look at each company’s recent earnings growth shows two very different trajectories.
Facebook’s EPS is rising much faster than Alphabet’s. For instance, in Facebook’s first quarter of 2018, EPS soared 63% year over year. In the same period, Alphabet’s EPS increased 28% year over year when excluding a benefit in the company’s first quarter of 2018 related to a new accounting standard. Facebook’s operating income has similarly been growing much faster, rising 64% year over year in Q1, while Alphabet’s was up only 7%.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 185.51.
The projected upper bound is: 203.89.
The projected lower bound is: 185.80.
The projected closing price is: 194.84.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with FACEBOOK INC A). It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
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 26.0998. This is not an overbought or oversold reading. The last signal was a sell 4 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 52.51. 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 4 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 -52. This is not a topping or bottoming area. The last signal was a sell 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 3 period(s) ago.
Rex Takasugi – TD Profile
FACEBOOK INC A closed down -1.910 at 194.320. Volume was 46% below average (neutral) and Bollinger Bands were 33% narrower than normal.
Open High Low Close Volume___
197.320 197.600 193.955 194.320 15,811,602
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 198.28 185.93 178.43
Volatility: 27 33 34
Volume: 19,740,798 20,697,862 23,692,948
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 8.9% above its 200-period moving average and is in an upward 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 bullish on FB.O and have had this outlook for the last 45 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.