Medium term
Trade view / 01 July 2016 at 11:53 GMT

Time to 'friend' Facebook?

Director / PIA-First Limited
United Kingdom
Instrument: FB:xnas
Price target:
Market price:

Candlestick pattern: January 2016 saw a bullish engulfing formation following a series of Doji’s.
Most recent support: The stock saw heavy rejection at the $106-108 level (April & June) indicating support in this area.

Stochastic oscillators: The weekly MACD turned positive in February of this year with a cross to the upside and is currently trading near the upper end of its most recent range (albeit weaker of late).

Moving averages: The stock is trading above both its 200 & 50 day simple moving average

Volume: Recent trading has seen volume marginally below the stock's average (24 million on the 50-day, 29 million over 200 days).

Anchor industry and company drivers:

Medium term: Daily active users continues to increase with latest (Q1 2016) figures reporting a figure of 1.09 billion (a 16% increase versus the prior year).

Longer term
: Mobile daily user numbers have also been moving higher, and as of Q1 stood at 989 million (a 24% increase).

Growth: It is PIA’s expectations that global internet usage will continue to grow in the coming years on the back of increased broadband speeds and mobile penetration rates.

Latest Numbers: Q1 2016 Results (published April 27)

Recent results: FB posted a positive set of Q1 figures with revenue (chart above) coming in at $5,382 ($3,543 for the same year ago period) and operating GAAP margins of 37% (versus 26% for the equivalent 2015 period). 

Diluted earnings per share (EPS, see chart below) also saw a positive increase with a read of $0.52 versus $0.18.

Monthly active users: Plus 15 % year-on-year increase to 1.65 billion as of Q1 2016.

Standalone valuation: FB has an Altman Z-Score of 42.34 (a read of >3 generally indicates solid underlying company financials).
Competitor/industry valuation: Trades at a discount to its peers on a number of forward metrics.

Most recent operating net cash: As at Y/E cash and cash equivalents stood at $6,456 million ($4,907m Q4'15). Free cash flow (chart below) was $1,851m versus $1,198m for the prior year period.

Stock sentiment: Currently positive on the name

FB’s is due to release Q2 numbers in late July (date to be agreed).



Buy at current levels (114.25).
For breakout buyers (B), we would highlight $115.50 (mid June 2016 highs).
For pullback buyers (P), we would highlight $110 (late April 2016) with a lower level at $100.
Stop: as low risk market participants we would recommend a hard stop loss at $98.

Target: $125 and $135.

Time horizon: three to six months.

Four-hour chart:

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Source: Saxo Bank 

Daily chart:
Source: Saxo Bank 
Weekly chart:
Source: Saxo Bank  

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more


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