Stocks themselves should not be viewed in vacuum, especially if you’re looking for a medium term hold or beyond. What does that mean exactly?
Essentially, unless you put on a trade based on limited amount of time (Exodus plug), chart pattern, or known catalyst (earnings, product launch, governmental decision, etc.), any extended time of price appreciation should be viewed in the entire competitive landscape; not an as an individual stock.
It’s not called a “market” for some coincidental reason.
This brings me to the opportunity presented to Facebook today after they report earnings. Traders will definitely be positioning for a big move in one direction, but there’s a larger implication in my opinion.
Let’s face it, technology earnings have been acting like Biff Loman in a job interview: the expectation bar was set very low, yet the outcome was even a larger disappointment.
Google (I refused to call them Alphabet) and Microsoft left a brown spot in the bed last week. Apple is now down over 6% after their announcement last night. Don’t even get me started on the court jesters over at Twitter.
Considering the sell offs happening in big tech names, there should be a high demand for Facebook’s shares if they can beat their earnings and provide robust guidance as money managers, hedge funds, and eventually the retail side to fill up their proverbial technology allocation slot.
With a robust and promising quarter, my contention is this will lead to investors to further accumulate shares of Facebook as time goes on (think at least 3-6 months). This can just as easily be played as a trade (bear or bull), but I think the longer term risk-reward is truly enticing.
Bad report and it get drags down with the rest of tech and remains at the same level of interest to its peers. Good report translates to Zuck and crew getting that Super Mario mushroom style boost, and new tech investors rotating into it for the long haul due to a relative attractiveness over its competitors.
Make no mistake, although Facebook may not appear as a traditional MBA defined competitor to Microsoft, in the world of fintech markets that automatically adjust one’s “tech” holdings, as well as fund managers with the same directive, these two are clear competitors in the stock market.
The OG of social media is the sixth largest publicly traded company. Who’s above them? Yep, AAPL, GOOGL, MSFT in that order. No doubt FB has the clout, interest, and coverage to shift major money around. Their growth story hasn’t written an ending either.
The conditions are present for a prolonged move to the upside, and in my opinion, this is the seminal moment, even with the ultra-impressive run they’ve been on. I’m fully aware of the risks present, with so much growth baked into the price, as well as the hecklers that’ll come out of the wood work in the comments section.
Quick disclaimer, I’ve been long Facebook for over two years and will continue to be due to its diverse ecosystem of revenue driving apps and their seemingly noble and moral attempt to “connect to world,” simply a ploy to get as many users as possible. They come off as caring, but it’s all for profit. Genius.Comments »