NEW DIRECTIONAL CALL PLAYS
Facebook, Inc. - FB - close: 78.18 change: +2.03
Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 33 million
Entry on January -- at $---.--
Listed on January 08, 2014
Time Frame: Exit PRIOR to earnings on January 28th
New Positions: Yes, see below
Why We Like It:
FB is the largest social media company. If the company's audience was a country their 864 million daily active users would mark them as the third most populous country on the planet behind India and China. They have 1.35 billion monthly active users. FB has done an impressive job in monetizing all of these eyeballs. Earnings continue to growth. The company has beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row.
Last month Citigroup issued a pretty bullish note on Instagram. Back in April 2012 the market was pretty skeptical when FB CEO Mark Zuckerberg decided to pay $1 billion to buy Instagram. Yet two years later Instragram has surpassed 300 million users. Citigroup now estimates the business is worth $35 billion (FB actually paid about $715 million).
FB continues to see strong growth in its WhatsApp texting service. Last April FB paid an astonishing $19 billion for the instant messaging service when WhatsApp had 600 million users. This past week WhatsApp hit 700 million monthly active users. FB still hasn't announced any new plans to monetize this service but will be extremely valuable when they do.
Wall Street is growing optimistic on FB. Thomson Reuters said analysts have been raising their earnings estimates on FB's Q4 results.
According to the IBD analysts "now expect Facebook to earn 48 cents per share minus items in Q4, compared with 31 cents in Q4 2013. That's an increase of 55%."
The amount of video content on FB is growing as well. Last year FB purchased LiveRail, a small startup that now helps FB deliver video outside the social network. CEO Zuckerberg recently said that the amount of video in the average user's news feed rose 3.6% in the past year. The number of video posted by users soared +75%. FB has been delivering more than one billion video views a day since June last year. The company plans to capitalize on this trend and sell more video advertising. That's why it's not surprising that FB just announced today they purchased QuickFire, another video technology company.
Shares of FB didn't really participate in the market's bounce yesterday but they appeared to be playing catch up today with a +2.65% gain. The stock is bouncing from technical support at its trend of higher lows. I see this as a opportunity for a short-term trade to play a rally into FB's earnings report. The company is set to report Q4 earnings on January 28th. We do not want to hold over the announcement.
The simple 10-dma is at $78.50. We are suggesting a trigger to buy calls at $78.65.
Trigger @ $78.65
- Suggested Positions -
Buy the FEB $80 CALL (FB150220C80) current ask $2.99
Option Format: symbol-year-month-day-call-strike