Where Is Facebook (FB) Stock Headed in the Short Term?

Metrics predict Facebook shares headed higher

Facebook FB stock

Facebook Inc (NASDAQ:FB) stock has continued its ascent this year with a gain of more than 39% through Monday’s close. In fact, FB shares have been in a primary uptrend since January 2013. Then, in late 2014 the stock went through an horizontal consolidation, a pattern that continues to persist with each new important  level as a result of the company’s impressive growth and launches of new products and services.

Following the success of its ‘Instagram Stories‘, a feature which lets people post 24-hour ephemeral content that disappear, and the global roll out for iOS and Android, Facebook has moved on to take on eBay (NASDAQ:EBAY) and Craigslist with its newly-launched ‘Marketplace’ feature. However, the social networking giant remains focused on virtual reality [VR], a technology seen by many in computing as the next e-commerce frontier.

At the Oculus Connect 3 developers conference lastThursday, Facebook CEO Mark Zuckerberg said that Facebook-owned Oculus is building a standalone virtual reality headset that comes with “positional tracking technology”, a feature that allows the Oculus Rift version to understand where it is in physical space and adjust the onscreen content accordingly. Zuckerberg then showed off a taste of the company’s mobile VR future which brought cheers from the 2,500 devs present.

Zuckerberg also said the product, which has no wires and no connection to a PC and functions on its own with built-in computing power and sensors, is still in its prototype stage. He noted that the headset, dubbed Santa Cruz, will be build for the middle range of the market, which has huge untapped potential.

According to a BI report, shipments of VR headsets will grow at a 99% compound annual growth clip into year 2020, creating a $2.8 billion hardware market by the same year, up from an estimated $37 million market in 2015. So clearly, the revenue stream potential is there and if Facebook becomes the dominant player in this market segment, this could deliver significant gains not only for the company itself but also for FB shareholders.

Speaking of Facebook stock, ticker has risen 24.44% this year and is continuing its upward trend. Despite the run-up in the share price, equity analysts rate the stock a ‘Buy’. Of the 43 analysts following the name, 36 rate FB a ‘Buy’, six recommend ‘Hold’, whereas the rest – only one in this case – suggests a ‘Sell’ rating. The median 12-month consensus price target on FB shares is $156.50 with a high target of $185.

With nearly $23 billion in annual revenue, Facebook has a market cap of about $375 billion, and a stock trading at 61x its trailing-12 price/earnings ratio. In the past 52 weeks, shares of the social network have traded between a low of $89.37 and a high of $131.98, with 50-day moving average [MA] and 200-day MA located at $127.57 and $119.71 levels, respectively. Additionally, Facebook  stock trades at a P/E ratio of 0.92 and has a Relative Strength Index (RSI) and MACD indicator of 54.97 and +0.06, respectively.

So, now that the stock has hit a new all-time high of nearly $132 per share, the question is where is Facebook headed?

As the Street looks forward to the 3Q16 earnings report on Nov. 2, expectations for the Menlo Park, Calif.-based company remain quite high. Wall Street analysts are on average expecting FB to post $6.9 billion in sales during the quarter. This would show a 7.14% increase from the 2Q16 revenue of $6.44 billion, as well as an increase of 53.33% from the same period in 3Q15. EPS in Q316 are expected to come in at $0.96, a growth rate of 84.61% from $0.52 per share a year earlier.

The Bottom Line on FB Stock

While Facebook’s strengths can be seen in multiple areas, such as its largely solid financial position with more than $23 billion in total cash, notable return on equity and expanding profit margins, currently at 13.40% and 27.18%, respectively, if they, meaning the company, continues coming up with innovative ways not only in terms of VR strategy and plans to tackle the competition, but also in fueling growth through higher monetization and strengthen its 1.7 billion user base, then all these factors combined will unavoidably prompt the equity to keep ticking toward higher-highs.

Technically speaking, as the stock continues to vacillate near its multi-week trading range top, a move through $130 on good volume could portend further technical upside for the shares with a short-term target projection of $133.50 – $134.50. At $130 price support is at $128.86.

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