Facebook share prices at a crossroad
The latest developments in the social media space have affected the biggest social network of them all - Facebook. With tow grand acquisitions in the past couple of months the company is faced with some substantial challenges as to how is it going to continue its great performance going forward. In our opinion there is only one important trigger ahead - the earnings for Q1 2014.
The company will announce its latest earnings numbers on April 23rd after the market closes, so be careful with that one. The consensus estimates by the forecasters on Wall Street centers around $0.24 per share, which is 100% higher than a year ago, while revenue us expected to come at $2.3 billion.
Other key metrics to look at are the company's gross margins - expected at 74.5%. Those who read this earnings report should focus on user engagement. The main reasons behind the advertising revenue for Facebook is its users remaining active on the social media website.
The company reported a very strong quarter in Q4 2013 and both desktop and mobile revenues were up solidly. Facebook refrained from reporting specific engagement numbers for the teenage part of the population which is seen as a sort of leading indicator driving future revenues.
The overall level was reported at 62%, with North America being the most active with 73%, follow by Europe at 69% and Asia at 54% to conclude the numbers. The newly acquired platform Whatsapp is currently free from advertising, while Instagram is also quite free from that.
If we look at the charts we see that prices have dropped substantially from recent highs just above $72. The price of the company's shares is currently just below $59, which is still way higher than levels seen last Monday around $56. Now we are seeing very good opportunities on the charts as we have some key levels to watch.
On the upside we have a descending trend line from the top marked above $72, through mid-April peak at $63 all the way down to mark levels between $60.50 - 60.70 to be quite important in terms of an upside move. Coincidentally we are seeing this double top in the $60.45-50 area and we should consider to buy calls if this stance is broken to the upside on an hourly basis.
The downside so far seems further away from current prices - the main support level is the low from last week marked just below $59. On the other hand we have a rising trend line from April's lower low at $55.44 through last Monday's $55.88, which is currently getting to the $56.10 - 56.30 area.