If you have even glanced at the paper or online news, you must have found out that Facebook has shot up in price recently. On Wednesday, June 24th, Facebook (FB) was at a dismal $26.51. At the time of writing, Facebook is over the $37 threshold. More astounding than the 30% rise in share price on June 25th, however, is that the momentum is still strong. Because many people bought stock in FB between the $38-$45 range on its first day of trading, I see the $40 threshold as a true test for momentum. Past that mark, people will either get out of the miserable ride they had endured with Facebook over the past year or will be caught up in the momentum and continue to hold.
Why did Facebook shoot up? The obvious answer lies in earnings. FB blew past expectations, earning a gross income of $1.81 billion, with mobile advertising revenue reaching 41%. Facebook also grew its number of daily active users by 27%, and with monthly mobile active users representing 71% of Facebook's clientele, all the numbers form a beautiful, healthy company. Since FB had been at a "discount" price of $26, everyone jumped in for some profit.
While I "like" this turnaround, the $40 threshold still looms. If Facebook passes it with little difficulty, it has the potential to soar beyond $50 in August.
~Andrew Jabara
President of the E-Stock Club
Disclaimer: The author currently holds a position in Facebook.
