Facebook Inc stock is up a big 7 percent in the past one month. And Jim Cramer reckons that shares need to retrace before investors can consider buying them.
“You’ll get a market wide pullout. We haven’t had one in six weeks…when you have it, take a look at Facebook,” the “Mad Money” host said yesterday.
Facebook Inc Stock Needs to Go Through a Period of Consolidation
Cramer goes on to add that investors need to be cautious after the stock has run up so much. “You always have to be careful when you have a situation that goes straight up.” But a lot of the recent rally can be attributed to the fact that the earnings per share are way too low, resulting in a “compressed multiple.”
“You have to look at it in 2017, 2018 earnings and you’ll see a stock that is radically very cheap vs. the average stock in the S&P 500,” he explained.
Jim Cramer has been a big bull on Facebook stock. After the social network posted fourth quarter results, he publicly pronounced that the company is the best story of the year. Accelerating revenue growth, strength in mobile, and the potential of Messenger and Oculus Rift, all make Facebook “the best news story of the year, frankly, if not the decade.”
Wall Street is Betting on the Facebook Inc Rally
Besides Cramer, a number of noted Wall Street analysts also think that this Facebook Inc rally has a lot more upside.
“We envision strong performance going forward,” Michael Napoli of investment research firm Value Line, wrote in a recent report. Napoli argues that Facebook holds an “enviable position within the social networking space,” and is likely to continue experiencing positive member engagement trends.
On the back of strong growth in earnings and revenue, Facebook is well positioned to “out perform the broader market averages for the coming 6 to 12 months.” And “this trend will probably continue through late decade,” Napoli, who has an “outperform” rating on Facebook, with a 12 month target price of $130, told clients.
Another major FB backer is Oppenheimer’s Jason Helfstein, who also has a $130 price target. Helfstein is especially bullish on the outlook for Instagram, whose “revenues are set to expand in the near future,” amid the projected jump in monthly average users to “985 million by 2018.”
Shares of Facebook Inc closed Monday at $111.85, up 0.4 percent. The stock hit a 52 week closing high of 115.09 on February 01.
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