Facebook, Inc. (FB): The Fat Lady is Singing

While the financial media has been running around sounding the death knell for internet retail & social media stocks like Twitter, Expedia, and Amazon; they’ve failed to discern a little voice in the distance.  It’s the Fat Lady, and she’s singing.

Shhh, don’t tell them, because they won’t know what to do with the change in direction, but here’s a little secret:  Facebook, Inc. (FB, $62.51) shares stopped falling on April 4.  The stock is now in a recovery phase.

Facebook’s earnings per share (EPS) growth is projected to be 43%, 33%, 35% in 2014 through 2016.  The 2014 price-earnings ratio (PE) is 48, which is entirely reasonable in comparison to 43% earnings growth.  It’s simply higher than I prefer, in my quest for undervalued stocks.

While FB shares don’t earn a buy rating from Goodfellow LLC, here are the bald facts:

• Barring any sudden bad news, the stock is done falling;

• it has formed an orderly bottom on the technical chart;

• and it’s ready to rise again.

• The shares are now fairly valued.

• There’s upside price resistance at $67.

On March 10, I successfully advised investors to complete a trading buy recommendation from January 30.  The stock reached its highest closing price that day, at which point I changed the rating to hold, and advised shareholders to use stop-loss orders.

I wouldn’t buy the stock now, because there are many other undervalued opportunities available, for traders and investors alike.  But if you own the stock, and you’ve been panicking, relax.  The worst is over.  You might, however, want to start practicing using stop-loss orders, to improve your future stock portfolio performance.

Anybody can buy a stock that’s rising.  But it’s your ability to moderate risk that delivers the portfolio performance that you’re looking for.

Goodfellow LLC Rating: Aggressive Growth, Volatile, Public.  (04-21-14)

FB data by YCharts

 

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Send questions and comments to research@GoodfellowLLC.com.

Happy investing!

Crista Huff

President

Goodfellow LLC

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