Facebook, Inc. (NASDAQ:FB) Expect further deceleration in the social network’s business growth

Facebook, Inc. (NASDAQ:FB) Expect further deceleration in the social network’s business growth

Facebook, Inc. (NASDAQ:FB) Expect further deceleration in the social network’s business growth

Social network Facebook (NASDAQ:FB) is slated to report its fourth-quarter and full-year financial results next Wednesday. With shares down about 30% since the stock hit an all-time high of $218.62 last summer, the pressure is on. Decelerating growth, some high-profile privacy and security issues, and a decline in the stock market that hit tech stocks particularly hard during the fourth quarter of 2018 have been some of the main factors weighing on shares.

When the company reports results on Jan. 30, you can bet investors will be paying close attention. Ahead of the report, here’s a look at some areas worth watching.

Revenue and earnings-per-share growth

Highlighting the social network’s decelerating growth recently, Facebook’s year-over-year growth rates for both revenue and earnings per share have come down substantially in recent quarters. For instance, Facebook’s revenue and EPS jumped 49% and 63% year over year, respectively, in Q1, but these metrics increased just 33% and 11% year over year, respectively, in Q3

For Facebook’s fourth quarter, investors should expect a further deceleration in the company’s revenue growth rate, in line with management’s forecast in its third-quarter earnings call for fourth-quarter revenue to rise about 24% to 28% year over year. 

EPS for the period, however, is far more difficult to estimate since a small fluctuation in Facebook’s revenue growth rate or operating costs could have a significant impact on the company’s EPS growth. But assuming revenue rises 26%, operating costs rise 55% (bringing Facebook closer to its guidance for full-year operating costs to increase 50% to 55% compared with 2017), and Facebook’s tax rate is about 15%, EPS will likely be around $2.19. While this represents more than 50% year over year for the metric, EPS in the year-ago quarter was negatively impacted by a one-time charge related to the 2017 Tax Cuts and Jobs Act. When excluding this charge in the comparison, earnings per share of $2.19 in the fourth quarter of 2018 implies approximately flat year-over-year growth in the key metric.

Users

Investors will also want to check on Facebook’s new user metric, which it just started reporting last year. In contrast with Facebook’s monthly active user metric, which focuses on only one app’s users at a time, the new metric measures the number of people who use at least one of the company’s apps each month, giving investors a picture of the company’s overall network. “We believe this is a better way to measure our community over time, because so many people use more than one of our apps,” Facebook CEO Mark Zuckerberg said in the company’s third-quarter earnings call.

Facebook said over 2.6 billion people were using Facebook, WhatsApp, Instagram, or Messenger each month in Q3. This was up from 2.5 billion in Q2. Can the social network keep up this impressive growth?

Overall, the bias in prices is: Sideways.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 158.42.

The projected lower bound is: 136.63.

The projected closing price is: 147.52.

Candlesticks

A black body occurred (because prices closed lower 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 29 white candles and 21 black candles for a net of 8 white candles.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 64.3466. This is not an overbought or oversold reading. The last signal was a sell 3 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 58.58. 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 39 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 82. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 12 period(s) ago.

Rex Takasugi – TD Profile

FACEBOOK INC A closed down -2.470 at 147.570. Volume was 14% below average (neutral) and Bollinger Bands were 52% wider than normal.

Open High Low Close Volume___
149.200 151.530 146.370 147.570 22,378,694

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 146.26 139.71 167.38
Volatility: 27 51 48
Volume: 20,931,372 26,064,390 25,398,832

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.

Summary

FACEBOOK INC A is currently 11.8% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. 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 10 periods.

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