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What's a Better Buy: Facebook or LinkedIn 12.4.12

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 Fundamentals: Facebook has over a billion users compared to Linkedin’s 100 million users, but Linkedin is a site used by professionals so they have far different user experience expectations.  

Facebook takes in most of its revenue from advertising specifically using the sidebar like its advertising competitor google. More recently they have expanded to put some ads in the newsfeed but the problem they occur is if they put too many ads in the news feed their customer base becomes unhappy with the experience and less people are likely to click.

Linkedin does do some sidebar advertising but has expanded its revenue stream by selling premium memberships to customers and charging companies to recruit future employees on their site.

Because Facebook does not charge users a dime for using the site that does open the door for all sorts of potential.  Even finding a way to get $5-10 per user would do a lot to facebook’s top and bottom lines. Linkedin’s growth might be capped at becoming the premier site for job hiring.

 

Now lets take a quick look at valuations:

With this is mind one would have to say FB is the better buy because you are getting a much PE ratio for a sales growth percentage that is still very respectable.

Technicals: Both Facebook and Linkedin are coming up in overbought territory on the RSI indicator.  FB has show buyers will come in heavy in the $18.50-$20 range.  It should encounter some resistance in the $29 range.  However you are about to get the 50 day SMA crossing above the 100 day positively which could be viewed as a buy signal to some. In my opinion I feel that FB could be bought on dips after the RSI gets worked off into neutral territory.

Linkedin has recently crossed back above the the 200 day moving average and is consolidating here as it is overbought on most indicators.  This is a great sign if you bought the stock on that cross over because you get the feeling it is just waiting to take off back above both the 50 and 100 day moving averages.  LNKD could be bought on a breakout of above average volume of that 50 day with an upside target of first $112 and then then $122-124 range.

 



Conclusion: Since technically they both could be seen as buys in the the short to intermediate term, I will use the fundamental story of FB to break the tie and be a buyer of the dips in Facebook.

 

Disclaimer: Currently I am not long FB or LNKD

 

Bio: Zachary Teller has a degree in Finance from the University of Connecticut. Zachary has 8 years of equity trading experience.  His trading approach is largely technical but refers to fundamentals regularly to get a gauge on the markets as a whole. Feedback is always appreciated.

 

Email: zachary.teller1@gmail.com

Twitter: @zachteller16

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Would you "like" FB, ZNGA, or GRPN? 11.20.2012

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There is no question that FB is richly valued by traditional metrics, but the counter argument is that these are not traditional times and future prospects justify said valuation. Eloquent arguments can be made from either side, however while others are fighting lets try to make some money. FB is trading around $23 at last check. In order to have smooth sailing into the 7/27/12 earnings gap, FB needs to break and respect overhead resistance. The day of the formerly mentioned earnings had a high of $24.54; we can call that level 1. The following day FB opened at $24.04; our level 2. It is interesting to note that our level 2 resisted a recent gap up because of earnings on 10/24/12; indicating a strong ceiling and a selling opportunity. It is even more interesting to note that the high on Friday, 11/16/12, was pennies below our level 2, further strengthening our thesis.

Every time FB has made it up here in the sideways channel it has only taken a day or two to be promptly rejected. This may lead one to believe that price could break either way, and quickly. The ‘at the money’ straddle is trading for about $1.25 for the weekly, or about 5.3% of the stock. Given that the pattern may fail or take time to play out weekly options could be risky, but then again it only took five trading days for FB to move from $19 to $24. This could be partially explained by the 7% short interest in the stock and the fact that it is hard to borrow.

Similar names like GRPN and ZNGA have taken advice from AA, being perpetual earnings disappointers. FB probably should not be clumped into a basket with these stocks for FB is different, but then again that is what they all say.

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Feel free to e-mail any comments, feedback, suggestions, or general inquiries to…

Author

mark@keeneonthemarket.com

 

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The Zuckerberg Interview Bounce 9.12.2012

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Zuckerberg called the stock performance these past few months “disappointing”, and admitted that the drop in the stock price didn’t particularly help employee morale at the company. He did note, however, that morale wasn’t as bad as people might think, and that Facebook takes huge steps to reward its employees. Interestingly, Zuckerberg also said he enjoys being an underdog in the eyes of Wall Street, and stated, “The first half of the year was a little bit slow on products, but the next nine months I think there will be a lot of exciting stuff.”

Shares of Facebook were up 3.5% in after-hours trading following the speech. He looked comfortable as he answered questions, and for the first time he came out and said that Facebook does care about its shareholders. The highlight of his speech was his steadfast focus on the mobile space. He said the word mobile 34 times in a 32 minute speech. Zuckerberg said he expects advertising revenue to regain momentum, and that he ultimately expects mobile ads to generate higher revenue than desktop ads. As Facebook traffic occurs more and more on mobile devices, generating revenue in the mobile space will be key to progressing the stock price.

Finally, Zuckerberg pointed out that Facebook was not interested in building a smartphone, which has been a recurring rumor over the last year.

In his eyes, the future of the company remains bright, and time will tell if he can answer his skeptics and reverse the downtrend in the stock price.

Brandon Kieltyka is currently an undergraduate studying Finance at Daytona State College.

Twitter: @kieltyka05

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Morning Rage 9.12.2012

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Metals are also gaining some ground this morning. Gold futures are up 10.00 points, (0.58%) to 1744.90, and Platinum futures are up 36.00 points, 2.24%, to 1643.00. Brent crude oil for October delivery is at its highest close since August 16th on speculation of a euro zone bailout.

The MBA Purchases Applications, a Mortgage Banker’s Association compilation of various mortgage loan indexes, was released today. The report is released weekly on Wednesdays, and provides a gauge of the demand and momentum for housing. Actual growth rates in the composite index was 11.1%, a change from -2.5%, an 8% change in the purchasing index and a 12% change in the refinance index.

The Home Depot, Inc. (HD | 56.72 [-0.58]) was down a half of a dollar yesterday, but rose in after hours trading a tenth of a dollar. The stock could gain on news from the Mortgage Banker’s Association. The stock is chasing it’s all-time high that hasn’t been since 1999, around 65$. The stock is currently sitting at its 52-week high with the low of 31.03 not seen since last September.

Lowe’s Companies, Inc. (LOW | 28.60 [-.09]) stock was down a tenth of a dollar yesterday, and rose by a nickel in after hours trading. LOW is also peaking towards its highest price ever before the financial crisis around $35. The stock is also bearings it’s 52 week high of 32.29, the lowest 52 week price at 18.53 also not seen since last September. LOW has not steadily risen as HD, but saw a dip in the summer months of 2012.

Apple, Inc. (AAPL) and Facebook (FB) are both up in after hours trading, AAPL releasing its new phone today and Facebook’s CEO, Zuckerberg, reassuring investors that Facebook will continue to dominate social media through mobile devices.

Alex Kalish has a masters degree in economics from Suffolk University.

Suggestions and comments welcome: alexk@keeneonthemarket.com

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Market Recap 9.11.2012

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Metal futures and crude oil futures were mostly flat all day with gold up about 3 points and crude up less than half of a point. Natural gas gained 6.61%.

AIG ($33.03 | – 0.81%) had the highest volume of the day trading 217 million shares. Today’s volume is a result of the US Treasury selling off its stake in AIG reducing their stake from 53% to 16%. The Treasury gained $15 billion in profits from the sale of AIG stock. AIG has been trading between 30 and 35 since mid-August. 

Since the poor report on jobless claims last week and drop in exports in the international report this morning, speculation about a QE3 has increased. An asset purchase could improve exports by reducing the value of the US dollar. 

Important news besides Apple’s (AAPL | 660.59 [-2.15]) iPhone 5 debut tomorrow (possibly available for purchase by September 21st) is Facebook (FB | 19.43 [+0.52]) CEO will speak publicly since the IPO debacle. Facebook has continued its climb up the fourth day in a row hitting prices it hasn’t seen since August 24th.

Texas Instruments Inc. (TXN) announced second-quarter revenue of $3.34 billion, net income of $446 million and earnings per share of 38 cents. The stock stayed even today, slightly down $0.09, but the after-hours announcement caused the stock to surge $0.39 in after hours trading. TXN 52 week low and high is 25.60 -34.24 respectively. 

Some big economic events this Thursday include Jobless claims, Produce Price Index, and Bernanke’s Press Conference. 

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Halftime Report 9.7.2012

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Both the Dow and NASDAQ fell below its opening price today by 11:00 am, but the S&P 500 stands alone ahead 0.30% for the day sitting at 1,436.52.  US indices futures have stayed put as well. Metals futures gained substantial points today with gold, silver and copper up 1.99%, 3.02% and 3.57% respectively. Silver is sitting just below its high of the day at 33.67 and a high of 33.74. Copper is right below its daily high at 3.6425 with a high of 3.6525. Natural Gas just moved away from its low of the day at 2.6740 with a low of 2.6660, down 3.67%.

The Cooper Companies, Inc. (COO | 93.33) hit a new all time high today gaining 7.32 when the market opened to sit around 93. The gain is representative of the company’s third quarter growth in income of almost 50% from last year. Analyst expected earnings at $1.29 per share but the company outperformed with earnings of $1.36 per share.

Facebook (FB | 19.11) has shown three straight days of growth up almost 2 dollars from its new 52 week low on Tuesday. How long can Zuckerberg’s statement keep Facebook from continuing it’s slope downward? The 52-week at-the-money implied volatility has touched its low today. Put/call sentiment is bullish and the stock might just continue its slow climb up next week.

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Morning Rage 9.5.2012

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Some big movers last night were The Wendy’s Company (WEN | $4.52[+0.20]), gaining almost 5% in value.  Wendy’s 52-week range moves a little more than a point from 4.16 – 5.58 and hasn’t hit a high since mid August. Dish network Corporation (DISH | $30.13 [-0.89]) fell 2.87%. DISH’s 52-week range low and high is 22.61 and 35.64 respectively. Dish has been gaining ground since the financial crisis in 2008, averaging positive gains, but is down almost 20% since 2007.

US futures are down. DOW, S&P, and NASDAQ are all down 0.21%, 0.27%, and 0.33% respectively. Metals futures are down, silver down the highest percentage at 0.68%. Crude futures are down 0.26%.

Productivity and costs reports will be released in an hour. Productivity measures the growth of labor efficiency in producing the economy’s goods and services and unit labor costs reflect the labor costs of producing each unit of output. Since the beginning of the year, non-farm labor productivity has grown at an average of 0.75% from the previous quarter and unit labor costs are up an average of 1.5%. Consensus has both levels gaining at least 1% this quarter.

Alex Kalish has a masters in economics from Suffolk University.

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Morning Rage 9.4.2012

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Facebook Inc. (FB | 18.06 [ -5.40%]) is once again at a new low since the IPO in late May. FB is now more than seven points below its fifty day moving average. FB had a high in August that jumped over $22 but has been below $20 for most of the second half of the month. In pre-market trading today, FB dropped another half of a percentage point to 17.97. Where is the bottom? Amazon.com Inc. (AMZN | 248.72 [+0.18%]) sneaks higher overnight, trading about 120 thousand shares and edging higher $0.45.

A market moving report, the ISM manufacturing Index, will be released today at 10:00 AM EST. The ISM surveys 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. Readings above 50 percent indicate expanding, while below indicates contracting. Fed surveys have some southern cities improving while some New England cities continuing to be negative in the index, leaving the consensus before announcement below 50.