Should You Buy Or Sell the Facebook Inc (FB) Rally?

Page 1 of 2

Facebook Inc (NASDAQ:FB) seems determined to claw back to a reasonable performance before 2012 closes. In the last month, the stock is up almost 40%- against a 5% rise in the NASDAQ index- though it is still about $10 below its IPO price of $38. The tone of coverage of the stock has begun to shift from “failed IPO” to “company that is waking up and realizing that it needs to make money”- though we’re not sure whether that shift has been driven more by actual news and developments, or by the increase in the stock price itself. Read about e-commerce opportunities at Facebook and Facebook’s potential plans to develop its own games.

Facebook Inc (FB), JetBlue Airways Corporation (JBLU)

The results for the third quarter of 2012 suggest that Facebook Inc (NASDAQ:FB) has far from a revenue problem: the company reported a 32% increase on the topline from the same period in 2011, roughly in line with the growth rates from the first half of the year. Costs have been more of an issue, as pretax income came in about flat. Much of this was due to increased share based compensation; this came in $100 million higher for the quarter than a year earlier, and was particularly notable in explaining the rise in R&D cost. If we strip out share based compensation, however, operating costs were still up 50%- not a good point.

With its market capitalization back above $60 billion- despite net income being technically negative for the year- Facebook Inc (NASDAQ:FB) trades at 43 times analyst consensus for 2013 earnings. Specifically, expectations are for 65 cents per share in earnings; even if the company achieves that target, the multiple looks high unless earnings growth is very, very good. While short interest seems to have cooled about, about 12% of shares outstanding are held short. There have also been insider sales at Facebook (see a history of Facebook’s insider sales). Chances are that this doesn’t mean anything, as it is usually rational for insiders to sell stock- insider sales actually aren’t that predictive of anything for this reason- but it is at least possible that some insiders don’t like the valuation.

Technology and services focused hedge fund JAT Capital Management, managed by John Thaler, owned 6.2 million shares of Facebook Inc (NASDAQ:FB) at the end of September (check out Thaler’s favorite stocks). Tiger Cub Andreas Halvorsen’s Viking Global initiated a position in the stock during the third quarter (find more of Halvorsen’s stock picks).

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!