Facebook, Inc. (NASDAQ:FB) stock is in a win-win situation heading into FB’s earnings

Facebook, Inc. (NASDAQ:FB) stock is in a win-win situation heading into FB’s earnings

Facebook, Inc. (NASDAQ:FB) stock is in a win-win situation heading into FB’s earnings

Facebook (NASDAQ:FB) is scheduled to report its second-quarter earnings tomorrow. Given the bumpy ride that FB stock has endured over the past year, investors are understandably nervous heading into this earnings report.

After FB endured more bad press, including the tragic New Zealand shooting last month which was live-streamed on Facebook, there’s a lot of negativity towards FB stock at the moment.

However, in reality, there isn’t too much cause for concern about Facebook stock. Expectations for FB are really low at the moment.

The rebound of FB stock from $125 to $175 has been driven largely by the broader market. The FAANG stocks in general are having a fantastic 2019 so far. The NASDAQ is already making new all-time highs, whereas Facebook is still more than 20% down from its peak. While tech has surged, FB stock in particular has done nothing of distinction. It’s not hard to see why: FB remains dogged by scandals.

The Scandals Were Damaging

I’ve warned about the potential impact of political scandals on Facebook stock in columns on InvestorPlace dating back to 2017. I suggested that Facebook’s profit margins would fall because the company would be forced to hire more humans to improve its policing of the platform. That is precisely what happened, as the company’s cost inflation surged because it  hired tons of new employees. That offset last year’s revenue growth, and led investors to wonder if the best days of FB stock were behind it.

Even with the election now far in the rearview mirror, more scandals keep popping up. Just this past week, we heard about Facebook accidentally uploading as many as 1.5 million users’ email addresses inadvertently. At this point, scandals and outrages involving FB happen so frequently that we’re almost becoming indifferent to them.

But the ongoing cost of regulatory compliance and better tech policing will be high. FB has dug itself a hole in terms of credibility and reputation, and it has a lot of work to do to get out of it. All that being said…

Rumors Of Facebook’s Death Were Premature

All the uproar over Cambridge Analytica and Facebook’s numerous other scandals risks could cause investors to lose sight of the bigger picture. Last year, despite all the bad publicity, Facebook’s revenues surged  38% compared to 2017. Overall, its revenues jumped from $41 billion to $56 billion over the past year. Remember that as recently as 2013, Facebook generated annual revenue of  less than $10 billion. Additionally, its WhatsApp and Instagram platforms continue to grow at lightning speed, setting the stage for more rapid revenue growth in years to come.

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 169.88.

The projected upper bound is: 190.70.

The projected lower bound is: 177.52.

The projected closing price is: 184.11.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 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 79.8971. 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 72.97. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 51 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 205.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 8 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 14 period(s) ago.

Rex Takasugi – TD Profile

FACEBOOK INC A closed up 2.340 at 183.780. Volume was 3% below average (neutral) and Bollinger Bands were 7% narrower than normal.

Open High Low Close Volume___
182.740 184.220 181.480 183.780 19,954,814

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

Moving Averages: 10-period 50-period 200-period
Close: 179.28 169.45 162.40
Volatility: 15 25 49
Volume: 12,887,727 15,983,815 23,990,044

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 13.2% above 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 moderate flows of volume into FB.O (mildly bullish). Our trend forecasting oscillators are currently bullish on FB.O and have had this outlook for the last 14 periods. Our momentum oscillator is currently indicating that FB.O is currently in an overbought condition.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

You must be logged in to post comments :  
CONNECT WITH