Social media has come a long ways. Big players like Facebook (FB), Twitter (TWTR), and LinkedIn (LNKD) dominate the social connecting and networking scene. But if investors reaction to Twitter and Facebook earnings are a sign, perhaps the sector is set for some price consolidation.
Tonight Facebook reported strong earnings, beating estimates on the top and bottom line. Mobile growth was a big factor and one would think investors would be cheering. But the stock is down over 8 percent in after-hours trading as I type.
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As an investor, there are many variables to factor in, including psychology. The stock moved over 10 percent higher from its October 15th trading low, reaching a new all-time high today. So expectations were high going into Facebook earnings. Couple this with its $200 Billion market cap and perhaps their earnings report was priced in (hence, sell the news).
Here are a few of the concerns: Facebook said that costs would rise considerably and provided some additional valuation and accounting metrics on their huge acquisition of WhatsApp. Facebook noted that their multi-billion dollar acquisition, WhatsApp, lost $138 Million dollars on $10.2 Million in revenue. They also guided 4Q revenues a bit softer than expected.
From a technical perspective, Facebook is testing the October 16/17 gap in after hours. The next level of support is the October 15 low (70.32) — that low serves as a psychological barrier as it came while the market was in panic mode. So any violation of that level would be a yellow flag.
It will be interesting to see how the stock opens tomorrow and whether traders view this as an opportunity in the early going.
Facebook (FB) Daily Chart – blue arrow represents after-hours price action
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No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
