(Invezz) – Facebook (NASDAQ: FB)shares have advanced from $261 above $285 in less than five days and the current price stands around $284. Facebook has found strong support above $260 but the price is still not able to surpass $300 resistance.
Fundamental analysis: Facebook is moving to monetize WhatsApp messaging
Even with the COVID-19 pandemic, the business of Facebook is going well and the company will have a rise in revenue this year. Facebook is moving to monetize WhatsApp messaging and this will enable businesses to sell products inside the app.
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
India is one of Facebook’s highest user bases and digital advertising in India is expected to grow by 27% in the next 5 years. While valuation is near multi-year highs, some fund managers raised its Facebook target to $320 from $310 (implying 13% upside).
According to analysts, the Facebook price will continue to rally and will be above $300 before the US presidential election on 03 November. The company is reporting earnings a few days before the election and this will be in focus for investors.
The company increased its revenue in 2019 to $70.69B from $55.83B in 2018 and the growth projects will ensure that the numbers will be moving up in the future. At its current share price, Facebook could be a very good short-term investment with solid growth prospects.
I said short- term investment because with $811B market capitalization this stock is overvalued in my opinion and represents opportunity only for short-term traders. Profitability ratios also confirm this, P/E is above 30 which confirms that this stock is expensive.
It is also important to mention that Barclays analysts see the valuation of Facebook at bubble levels and they also think that this company is overvalued. There are some obvious risks when it comes to trading this stock currently but Facebook stability and size will always be attracting potential investors and traders.
Technical analysis: Bulls remain in control of the price action
Data source: tradingview.com
On this chart, I marked important resistance and support levels. The important support levels are $260 and $240, $300 and $320 represent the resistance levels. If the price jumps above $300 it would be a signal to buy Facebook stock and we have the open way to $310.
Rising above $320 supports the continuation of the bullish trend for Facebook and the next price target could be located around $330 or even $350. On the other side, if the price falls below $260 it would be a strong “sell” signal and we have the open way to $240.
Facebook stock is struggling to get above the important resistance at $300 despite the fact that “bulls” remain in control of the price action. There are some obvious risks when it comes to trading Facebook shares but as long the price of Facebook is above $260 this stock remains in the bull market. The technical picture implies that the price may advance again above $300 resistance but in my opinion, this stock is a little overvalued. Facebook is a stable company with a good position on the market but the current risk/reward ratio is not good for long-term investors.