Facebook Inc (NASDAQ:FB)
FB Overview & Technicals
Shares of Facebook ($FB) have been under some pressure over the past few weeks but some think that FB is in prime position to really gain some momentum into the coming year. With lower tax rates on the horizon and strong fundamentals heading into 2017, FB is in great shape to see some buyers step in and bring this stock price back up. One thing analysts will be looking for is how well FB will be able to capitalize on advertising abroad as most of its ad income is from the US and Canada.
Looking at the daily chart above you will see that shares have sold off after reaching highs back in October at $133.50 and have been churning around their 200-day moving average that is currently sitting at $119.82. You will also notice that shares have been stuck between a descending resistance and rising support level making a bit of a wedge pattern. Shares tested the resistance trend line today and quickly pulled in but if we can break out above this resistance over the coming days we could see shares really gain some momentum to the upside. Make sure to look for some volume on the breakout to confirm the price action. The next level of resistance will be at the 50-day moving average which is currently at $123.79.
Analyst Notes
-BOFA Comments
Early sentiment challenges should fade; Maintain Buy
Facebook enters 2017 with solid user/usage fundamentals, but with three notable sentiment challenges for investors, including a possible estimate cut on higher 2017 expense guidance, the Snapchat IPO, and a slowdown in 2H’17 ad growth. That said, we think pricing upside could drive the stock in 2H’17, and we look for greater visibility on 2018 drivers like messaging, live video and search as 2017 progresses. Overall, we remain optimistic on stock performance in 2H’17 given multiple compression in 2016.
Optimism on new opportunities key for stock.
For the stock to breakout (multiple expansion), we think the Street needs greater visibility on new drivers in 2017. Messaging has the biggest potential, and we believe WhatsApp and Messenger will make progress adding new business tools during the year. Facebook Live gained traction in 2016 and we expect engagement and possibly new video ads to ramp in 2017 (see Streaming primer). The company launched Workplace, Marketplace, and several local commerce features in late 2016 that could see activity in 2017. If nothing new emerges, the core story is solid and we think the stock could hold its forward P/E at 20-24x and benefit from 20%+ earnings growth. We est 23% EPS growth in ’18 to $6.59.
Positive cases/catalysts for the stock.
1) Pricing upside on strong demand, lower supply growth and improving ad formats (canvas, video); 2) Instagram ad revenue ramps faster than expected; 3) greater visibility on messaging or live streaming monetization strategy; 4) competitive outlook improves as new FB or Instagram features drive usage; and 5) valuation on 2018 estimates is attractive. We are slightly above Street on 2017 EPS at $5.34 vs $5.27.
Negative risks/catalysts for the stock
1) Concerns on Millennials/Gen Z usage share loss, exacerbated by Snapchat IPO; 2) higher expense growth outlook in January & FX pressure results in negative estimate revisions; 3) revenue deceleration in 2H as usage and ad load tailwinds fade; 4) incremental international regulatory risk (including Net Neutrality changes) with new administration; and 5) pushback from advertisers on measurement issues.
Facebook Profile
Facebook, Inc. is a social networking company, which allows people to communicate with their family, friends, and coworkers. Its services include timeline, news feed, messages, lists, ticker and mobile apps. The company products include Facebook, Instagram, Messenger, Whatsapp and Oculus. Facebook was founded by Mark Elliot Zuckerberg, Dustin Moskovitz, Chris R. Hughes, Andrew McCollum and Eduardo P. Saverin on February 4, 2004 and is headquartered in Menlo Park, CA.