Market Insight

Facebook at Face Value


Facebook toyed with major intermediate-term support on its Thursday rout. As noted in the chart below, support can be seen at the gap up in the mid-160's from May, and a next level of support near 150 following Facebook's late March swoon.

Here's the chart:



So not much of a surprise to see the lows where they settled on Friday, supported by a wide channel trading range (175 to 195) that starts in August of 2017.

From a valuation perspecitve, I see FB modestly overvalued at its $175 close, by about 5%, pinning fair value near $165 per share. My valuation metrics are below:


So probably not a bad level to wade into the stock, taking note of potential additional downside risk should the stock revisit its March-April lows. 

As for the assumptions in the valuation model, I have assumed a rather conservative 15% growth rate in free cashflow.  I look at growth from a long-term perspective, considering the company shifting to a more mature business model.

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