Facebook Inc (NASDAQ:FB) shares were down 0.23% at the start of the week, weighed down by the general slump in the US market, but prices recovered 0.56% in after-hours trading. Share prices have been trading in a 52-week range of $89.37 to $133.50. The company has a market cap of $375.30 billion at 2.32 billion shares outstanding.
Facebook Inc is a social media company that builds products that enable people to connect and share through mobile devices and personal computers. Its products include Facebook, Instagram, Messenger, WhatsApp and Oculus.
The company is set to report its third quarter earnings after the market close on Wednesday, which means potential volatility and trading opportunities for Facebook Inc shares. Analysts expect the company to report a 70% increase in earnings thanks to strong sales and advertising growth.
In particular, momentum from ad sales should continue to drive up revenue considerably for the period, partly due to better engagement figures. Of course the company is also set to address several issues over the past three months, such as misstated video metrics and the slow start after its Oculus acquisition, but stronger than expected earnings figures are likely to outweigh any negative updates.
FactSet’s survey shows that analysts expect Facebook to report profit of 97 cents a share, up from 57 cents per share a year ago. Crowdsourcing platform Estimize shows that brokerages and buy-side analysts predict earnings will come in at $1.03 cents per share. The company is expected to report revenue of $6.9 billion, compared with $4.5 billion in the year-earlier period, according to FactSet’s survey.
“Facebook has had a string of very solid quarters and associated positive stock moves, and we are consistently asking ourselves when the beat and raise music might stop,” noted Canaccord Genuity analyst Michael Graham.
Monetization efforts for Instagram and WhatsApp are also expected to impact bottom line earnings. Instagram alone is projected to add $4 billion to $5 billion to revenue growth over the next two years.
Stronger than expected results could drive the stock to $160 per share, which would be more than a 20% price gain over current levels. Analysts have pointed to sustained demand for mobile content, strong targeting potential, growing mass engagement, and potent monetization efforts as solid reasons for upbeat earnings and more Facebook Inc stock rallies.
Facebook Inc shares are still trading inside that long-term ascending channel visible on the daily time frame and are currently at the upper half of the range, suggesting strong upside pressure. Stronger than expected earnings results could even lead to a break past the resistance and a sharper climb for the stock.
On the other hand, disappointing data could lead to a drop towards the ascending channel support at $120 which is close to the 200 SMA dynamic support. The 100 SMA is safely above this long-term moving average, confirming that the path of least resistance is to the upside and that the uptrend is more likely to carry on rather than reverse.
Stochastic and RSI are both on middle ground on their way down, which could mean that buyers are feeling some degree of exhaustion and could allow a correction to take place. Still, a positive catalyst from impressive earnings results could lead to a pickup in volume, which would bring more buying interest from investors.