Facebook, Inc. (FB) is up about 2% in pre-market trade on Thursday after exceeding fourth-quarter 2020 top- and bottom-line projections. The social media behemoth made $3.88 per share in the third quarter, $0.64 more than expected, while sales increased 33.2% year on year to $28.1 billion, above the $26.4 billion average. CEO Mark Zuckerberg maintained 2021 spending and capital expenditure (capex) predictions, while predicting revenue to “stay constant or slightly increase sequentially in Q1 and Q2.”
- Facebook exceeded fourth-quarter profit and sales projections.
- Political headwinds are gradually fading, enabling fundamentals to take control of price movement.
- Price movement will most certainly be two-sided through March, but the stock might break out later this year.
DAUs up 11% year on year to 1.84 billion, while MAUs increased 12% year on year to 2.80 billion. The corporation has approved an extra $25 billion in share buybacks, providing a tailwind as political hurdles fade with the changeover to the Biden administration. In addition, the corporation said that it would no longer suggest civic or political organizations and that it is attempting to decrease the quantity of political information.
When Donald Trump left office, he was still hurting from Facebook and Twitter, Inc. (TWTR) bans that cut off his principal avenues of connection with supporters, and the attempt to eliminate Section 230 liability protections for social media fell down. Given such moves, Democrats are unlikely to advocate for improvements, setting the scene for an era in which ad revenues, rather than threats or intimidation, determine pricing action. As a result, the route to new highs may be cleared.
Through the election and its violent aftermath, Wall Street consensus on Facebook shares remained stable, with a “Buy” rating based on 39 “Buy,” three “Overweight,” six “Hold,” and one “Sell” recommendation. Price estimates presently vary from a low of $205 to a high of $397 on the Street, with the stock expected to start approximately $70 below the median $345 goal on Thursday. This modest positioning offers another tailwind that increases the chances of long-term gain.
Capital expenditures (capex) are cash spent by a business to buy, update, and maintain tangible assets such as real estate, plants, buildings, technology, or equipment. Capex is often utilized by businesses to fund new projects or expenditures. Capital expenditures on fixed assets might include replacing a roof, acquiring equipment, or constructing a new facility. Companies use this form of financial investment to broaden the scope of their activities or to add economic value to them.
Facebook Weekly Chart (2012–2021)
The stock went public in the low $40s in 2012 and immediately began an ascent, eventually stopping in the low $70s in March 2014. Price movement then relaxed into a tight rising range, which it traded inside until July 2018, when it peaked out at $219 and broke channel support, plunging to a two-year low. A modest increase returned to the earlier high in January 2020, resulting in a short rally, followed by a failed breakout and an 87-point fall into March.
A powerful rebound wave hit the first-quarter top in May, triggering an instant breakout, but momentum didn’t kick in until August, when the stock rocketed off in a vertical impulse, eventually reaching an all-time high of $304.67. Since then, price action has relaxed into a bearish descending triangle, implying significantly lower pricing, but this will reverse if the stock can rise above resistance at $290.
The weekly stochastic oscillator has entered a purchase cycle that suggests relative strength into March, while the monthly oscillator is still in an active sell cycle, indicating that price action will be two-sided. With the price anchored at the middle of the five-month trading range, this makes logical. Despite the disagreement, it seems that the planets are gradually aligning for a breakout that will reward patient shareholders.
A descending triangle is a bearish chart pattern used in technical analysis that is formed by connecting a series of lower highs with a single trendline and a series of lows with a second horizontal trendline. Traders often look for a move below the lower support trendline. because it indicates that the negative momentum is increasing and a collapse is near Once the collapse happens, traders initiate short bets and actively help drive the asset’s price more down.
The Bottom Line
After reporting extraordinarily good fourth-quarter earnings and sales, Facebook has gained a few points.
Disclosure: At the time of publishing, the author had no investments in the aforementioned securities.
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