Facebook – New Model Price Chart, New Opinion
February 3, 2013
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Thank goodness for weekends. This past week was a blur of activity with 4th quarter earnings releases, and client year-end reviews. Nothing like a television appearance on Monday afternoon putting me behind the 8-ball from the start of the week as well. So I want to rewind the tape and review a couple of situations that occurred during the week.
The first situation is Facebook (FB). Facebook announced 4th quarter earnings after the close on Wednesday. After the earnings were announced, FB traded down a quick 9%. Once the conference call started the stock recovered, but trading Thursday saw FB down $2 or 7% or so. Watching the after hours action and trading for Thursday and Friday I have to admit the market looked genuinely confused on how to treat FB earnings news.
And I have to admit I was confused of FB’s model price initial chart when it was produced after our computer run Wednesday night. See we reconcile all our numbers to the regulatory filings as the company produces them. So I know our past model price charts are correct. So I reconciled the numbers myself, on Thursday. And it seems the shares outstanding seem to be everywhere (maybe this is confusing the market as well), which has an impact on our model price charts. So I corrected these numbers to FB’s new regulatory filing and run the system to see the new FB model price chart and here it is.
Facebook Model Price Chart
Facebook with weekly price bars, EBV Lines (colored lines) and model price (dashed line)
For those interested, a daily updated chart of FB subsequent to this post will be maintained on Facebook, here.
My first observation was that FB was using EBV+5 as support since August of 2012. My second observation was in the last 4 weeks FB was trying to transit through EBV+6 or $32.04 and couldn’t. This to me is a cause for concern.
The elegant simplicity of model price charts quickly gives you a risk/reward scenario where FB presents investors little reward (7% upside to EBV+6) and a lot of downside risk (32% downside to EBV+5).
I think we would all agree that if Facebook traded down to EBV+5 or $20.18 this would be a great buying opportunity for investors and traders.
As the great John Maynard Keynes said; “When the facts change, I change my mind. What do you do, sir?” Here is hoping the market corrects and we are able to buy FB at EBV+5.