Facebook, Inc. (NASDAQ:FB) Valuation too low for expected growth
One of the biggest losers over the past three months has been social media giant Facebook (FB). With the company forecasting slowing revenue growth and investors worried about privacy and security, shares closed Friday nearly 30% off their all-time high. At this point, expectations have dropped to the point where the valuation makes this stock a buy in my opinion.
Just because of simple math, Facebook’s revenue growth rate was eventually going to slow down. The user base is now over 2.2 billion users, meaning growth in the latest quarter was just 11%, down from 13% in Q1 2018 and 17% in the year ago quarter. Many out there are concerned that user growth will slow a bit in the near term over privacy concerns and larger base numbers create a headwind.
Looking at 2019, the street currently calls for revenue growth of 24.6% to $69.26 billion and EPS of $8.30. At the current share count, that implies a net income margin of approximately 35.1%. Last year, the company had a bottom line margin of 39.16%, and in the first half of this year, the 40.05% net margin was basically flat to last year’s first six months.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
The projected upper bound is: 161.80.
The projected lower bound is: 146.74.
The projected closing price is: 154.27.
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 24 white candles and 26 black candles for a net of 2 black candles.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
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 27.1986. This is not an overbought or oversold reading. The last signal was a buy 9 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 40.75. 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 30 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 -30. This is not a topping or bottoming area. The last signal was a buy 5 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 buy 3 period(s) ago.
Rex Takasugi – TD Profile
FACEBOOK INC A closed up 0.730 at 154.780. Volume was 40% below average (neutral) and Bollinger Bands were 28% narrower than normal.
Open High Low Close Volume___
154.760 157.340 154.460 154.780 15,424,658
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 155.18 165.42 178.47
Volatility: 38 29 45
Volume: 21,915,346 23,839,180 27,840,184
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 13.3% below its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 21 periods.