Facebook Beats On The Top And Bottom Lines

Social media giant Facebook, Inc. (Ticker Symbol: FBWealth Strength IndexAAPL is Extremely Up and trending Up) reported earnings and revenue that were better than the street was expecting.  The Menlo Park, Calif.-based company reported an earnings per share beat of $2.12 vs. Wall Street analysts’ expectations of $1.91 per share.  Additionally, Facebook reported a revenue beat of $17.65 billion vs. the $17.37 billion in revenue that Wall Street analysts’ were expecting.

The American online social media and social networking service company reported that its daily active users came in at 1.62 billion vs. Wall Street analysts expectations of 1.61 billion daily active users.  Facebook reported that its monthly active users came in at 2.45 billion which was right in line with what Wall Street was expecting. The company did see an increase of 19% in its average revenue per user to $7.26 vs. the  $7.09 that Wall Street analysts’ were expecting.

Facebook has more than 2.8 billion monthly users across all of its applications in total. Its European user base increased to 288 million, up from 286 last quarter.  The company also had an increase in its U.S. and Canadian users which rose up to 189 million, up from 187 million last quarter.

The above image is a chart of Facebook’s stock of the past 10 months starting in January.  The stock started off to the year trending higher, then a first-quarter earnings release sent the stock gapping higher.  Facebook found some price support right around the $159 price level while forming a double bottom pattern over the course of the next two months.

Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In Facebook’s case, one would take the bottom price from the double bottom pattern (roughly $159) and the price of the neckline from the pattern (roughly $174) then subtract them to get the difference ($15). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move (Neckline + Difference = Measured Move). In Facebook’s case, the projected price target from the double bottom pattern was $189.00, which the stock achieved roughly one month after breaking out.

Shortly after, Facebook began to pull back and found some dynamic price support at its 200-day moving average late in the second quarter.  The stock then proceeded to rally over 25% finding some price resistance right around the $210.00 price level.  Since then the stock has pulled back to more realistic valuations.  Currently, Facebook is positive for the year and is trading above both its 100- and 200-day moving averages.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 28 analysts offering 12-month price targets, the average price target for Facebook’s stock is $238.52. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $192.59.

Investors in Facebook should look to their next earnings release on January 31st for fresh news within the company.

 


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