Facebook Inc will report first quarter result after the close of trade on Wednesday. And ahead of the “big day,” the stock seems to have broken below a key support zone.
Shares ended last session at $108.8, down 1.2 percent.
Will Facebook Inc Sell-off Post Earnings?
A look at the daily price chart of Facebook indicates that all might not be well with the stock, as the social network copes with sky high expectations from those on Wall Street. Shares have been in a strong uptrend since hitting a low of $94 in January. Sellers entered the market around $115, sending the stock lower. Most thought the pull back was routine, and was a good place to initiate long trades.
But the script may have changed after yesterday’s drop below the strong support area around $109. Break of price support ahead of earnings is never a good sign. Bulls seem tired, and will need a big “boost” to drive prices higher. Under such circumstances, long term investors should now look to buy the stock only on a close above $116. On the down side, $105 is the important level to watch out for. A dip below could accelerate the sell-off in the stock.
In-line Results May Not be Good Enough for Facebook Inc
Given that Facebook is trading at a huge premium, analysts and investors are both screaming for growth not seen in any of its tech peers.
“This is the highest bar stock of the internet space,” RBC Capital Markets’ Mark Mahaney told CNBC. “An in line quarter will not cut it for Facebook, the stock, as a trade.”
Mahaney forecasts Facebook to record non-GAAP earnings of 68 cents per share, on quarterly revenue of $5.4 billion. That’s just above the consensus estimate of 62 cents and $5.25 billion respectively, according to a Thomson Reuters poll.
However, Deutsche Bank analyst Ross Sandler expects first quarter results to come in light, which may cause shares to drop. He is projecting year over year ad sales growth of 53 percent to $5.1 billion, below Street estimates.
“We think investors may have an opportunity to add to positions below current levels after the first quarter results,” Sandler wrote to clients.
Interestingly, this will be Facebook Inc ’s first quarterly result since its much-anticipated foray into virtual reality with the Oculus Rift headset. Expectations from the device are muted.
“The financial contribution (of Oculus Rift) is likely to be much smaller in 2016 than in subsequent years,” according to Wedbush analyst Michael Pachter.