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This could ruin Facebook’s rally

Talking Numbers

It's finally back to its IPO levels but is Facebook now overpriced?

The last two weeks have been nothing short of phenomenal for Facebook shareholders.

Since reporting earnings on July 24, shares have rocketed more than 45%. Prices are now around its IPO price of $38 per share. That’s a level the company had a tough time maintaining after going public in May 2012. In fact, Facebook was as low as $17.55 back in September.

Facebook’s second-quarter 2013 financial report was a watershed for the company. That’s when investors started regaining confidence in the social media giant. Its revenues came in at $1.8 billion, $200 million more than analysts expected. And, its profits were $333 million in the past quarter, a far cry from its loss of $157 million the year before.

Driving Facebook’s growth is mobile, a segment Wall Street didn’t think the company had down fully when it went public. Out of its 1.15 billion users, 819 million of them use Facebook on mobile devices. Mobile ads account for over 40% of its revenues.

But is Facebook overpriced here?

Steve Cortes, founder of Veracruz TJM, says the fundamentals show Facebook’s valuation to be at an “absurd” level. On the Talking Numbers segment in the video above, he spells out his reasons he thinks Facebook is currently priced too high.

But what do the charts say? Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, takes a look at Facebook charts to see whether you should hashtag this stock as a #buy or a #sell.

To see Cortes and Ross analyze Facebook, watch the video above.

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