Facebook (Ticker Symbol: FBWealth Strength IndexAAPL is Extremely Up and trending Up) announced this week that the company is unveiling plans to release a new cryptocurrency. The open source currency will be called Libra and is set to be released to the public in the first half of 2020. Facebook is leading a group of companies that will be the main developers of the cryptocurrency with a goal of creating services for consumers to send money worldwide easily and for free. The objective is to make it just as convenient to send money globally as it is to send a photo or message.
The social media giant reported earnings in late April of .85 cents per share – which couldn’t be compared to analysts’ expectations because of a one time charge. However, Facebook’s net revenue did beat Wall Street’s expectations, reporting a revenue of $15.08 billion vs. analysts’ estimates of $14.98 billion. Daily active users (DAU), a very important metric for Facebook, was reported at 1.56 billion DAUs, which was right in line with Wall Street analysts’ expectations. Monthly active users reported were 2.38 billion vs. Wall Street’s expectations of 2.37. The average revenue per user ticked up slightly at $6.42 per user vs. Wall Street’s expectations of $6.39.
Facebook’s stock had a subpar start to the year in 2018. The stock spent the first five months trading lower, moving down 15%, before finding some price support around the $150.00 price level. Late in the second quarter, Facebook had a solid earnings and guidance report that sent the stock breaking through its downtrend and reclaiming its 100 and 200-day Moving Averages. It proceeded to rally eventually trading to an all-time high of $218.62 on July 25th, 2018. Unfortunately for shareholders, Facebook’s stock had a negative earnings release the very next day that sent the stock gapping lower over 20% on the news. The stock continued to sell off over the rest of the year, finding price support just below the $130.00 price level.
In the fourth quarter, the stock bottomed, forming a bullish divergence pattern, as indicated on the chart by the yellow arrows, where the stock makes a lower low in price but the Relative Strength Index makes a higher low. Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal as occurred in Facebook’s case. The stock has had a good start to 2019, finding temporary support at its 200-day Moving Average and bouncing higher after that.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 37 analysts offering 12-month price targets, the average price target for Facebook’s stock is $222.03. 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 $191.90.
Facebook has set the tone as the top social media player throughout its history. The company made strategic investments and acquisitions by buying up competitors and companies who might pose threats when entering its space. Facebook has a strong user base within its own platform, Facebook Messenger, Whatsapp, and Instagram that can all be used to help launch Libra and help make it a success. Investors in the space should look to Facebook’s next earnings release on July 26th for fresh news within the company.