Despite its omnipotent brand and unrivaled stature within the social media universe, Facebook's (FB) first month in the limelight as a public company has been, by and large, a disaster. And yet, in just the past five days there appears to be a pause in the pummeling, as the stock has begun to stage a major rebound.
To put it into context, if Facebook was included in either the S&P 500 (^GSPC) or the Nasdaq 100 (^NDX) indexes, today it could claim the title as hottest stock in the land, thanks to a 16% pop in the last week that has trumped the gains of every other large cap stock.
It's hard to say exactly what is happening or why, but if it lasts, the monster from Menlo Park will soon be back to its $38 IPO price. Another catalyst for the stock has been rising expectations surrounding its inaugural sales and earnings report.
"They should be able to pull some stops and put up a fairly decent number when they come out and release results in July," says David Garrity, Principal at GVA Research, in the attached video. He's also expecting a near-term boost come June 27 when the "quiet period" for analysts ends. "We can expect to see a wave of positive recommendations coming out of the underwriters."
Other recent positive (or at least non-negative) stories regarding Facebook include:
* FB's acquisition of Face.com
* The pending launch of its own App Store, allowing developers to test the creative boundaries, but also netting FB 30% of their take
* Evidence that suggests mobile ads earn 2.5 times as much as desktop ads
On the flip side, there are at least two, big near-term obstacles in Facebook's path. First, the expiration of the 90-day lock-up period which will allow a swath of insiders to sell shares on August 16 for the first time. The second headwind that might hinder the current rally could be the belated bite of regulators or other legal blow-back from any number of shareholder lawsuits that have been filed.
In the meantime, even in its diminished state, Facebook continues to be afforded high-growth valuations that give it a market value of about $70 billion, which is roughly equivalent to American Express (AXP) or Kraft Foods (KFT).
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- Investment & Company Information