FACEBOOK SHARES BUMPING INTO RESISTANCE - CAN THE BULLS PULL THIS ONE OUT?

Facebook, Inc. FB shares have been a wild ride for investors and traders over the last couple of months – first dropping from $80 to $70 in mid-October and then rallying back to $81.16 within ten trading sessions and then dropping over ten percent within three sessions. Crazy stuff! So, where does the stock go from here? Does the company have enough fundamental fuel to turn Facebook into a rocket headed straight up once again? Or, is perfection priced into this stock? Let's take a look… What the bulls see in Facebook… • Great anticipated revenue growth for 2015 – exceeding 37.4% • 24.66% net profit margins that spin off over $3.34 billion in positive levered free cash flow annually • A clean balance sheet: o $14.25 billion in cash versus only $278 million in debt o A debt-to-equity ratio of 1.31 o A current ratio of 13.06 What the bears see in Facebook… • Very rich valuation metrics: o A PE of over 38 – which is nearly matched by 37.4% estimated revenue growth but is very high versus the 13% estimated EPS growth for 2015 o A price-to-book ratio of 9.49 o A price-to-sales ratio of 19.32 o A market capitalization of $216.6 billion that trumps the enterprise value of $202.6 billion The technical take on FB shares… Technicians note that Facebook stock rallied to new highs following the October low but gapped lower and have been struggling since making a peak at $81.16 on October 28th. They did manage to make a higher low on November 20th but are now testing resistance at the underbelly of the broken long-term uptrend line at $77.75 - $78. Support for the stock comes in at $72.36 and $70.32. Overall… Adventurous shorts may be looking to take their shot at Facebook at current levels but will have to honor stop losses on any close above $79. Aspiring longs will likely be aggressively buying if and when the stock dips back down to the support range at $70.32 - $72.36.