--Facebook stock has rebounded more than 20% from June 5 closing low
--Trader says institutional investors' instinct to sell shares has
waned as shares stabilized
--Some analysts positive on the stock
(NEW YORK--Facebook (FB) shares spent a full session above $30 for the
first time in more than three weeks Tuesday, capping a 23% climb in
the last two weeks that marks a stark turnaround from the stock's
early troubles.
The social network's stock was off 20 cents, or 0.6%, at $31.71 early
Wednesday. But it has rebounded smartly from its June 5 closing low,
recovering about half the tumble it had suffered in the weeks
following its debut. A confluence of factors have been cited as
fueling share gains.
Traders and other market participants have speculated that some of the
rise is attributable to investors moving past an initial aversion to
the shares.
"It just seems like the selling pressure has gone away," said Sean
Kelly, managing director at market-making firm Knight Capital Group
Inc. (KCG). He said traditional buy-and-hold investors, or "long-only"
holders, have been warming to the shares. "We'd had "long-only"
players who had been selling the name ever since it got down into the
low $30s, and selling it relatively aggressively. We just haven't had
those calls in the last several days."
The amount of media coverage critical of the company's initial public
offering on the Nasdaq Stock Market has receded, potentially reducing
investors' jitters about the stock, said Mr. Kelly, who heads
stock-trading on behalf of Knight's institutional clients such as
mutual funds and investment advisers.
As negative news coverage has ebbed, Facebook has continued efforts to
move its business forward, saying this week it agreed to buy
facial-recognition startup Face.com. Facebook also is announcing moves
to strengthen its nonadvertising business. It will start allowing
users to make payments to developers of games and "apps" on the site
in local currencies, replacing a system pegged to the U.S. dollar. The
company also plans to let application developers charge users for
their services on a subscription basis. Facebook takes a 30% cut of
payments made to third-party developers.
"We're starting to see some sense of how the company is going to
monetize," said Fuad Ahmed, whose company Success Trade Securities
Inc. owns discount brokerage Just2Trade. "That's the most important
thing...how are you going to make money? Our customers are starting to
hold the stock overnight. They're starting to feel comfortable."
In addition, the early steep fall in Facebook stock was cited as
potentially positioning shares for a rebound.
"Part of it could be a natural bounce. You don't often see a stock
come from its high of $45 to a low of $25 in a couple of weeks," said
Joe Kinahan, TD Ameritrade (AMTD) chief derivatives strategist. The
stock briefly surged to $45 in its first day of trading but quickly
surrendered those gains.
Technical analysis also supports the stock's rise. One sign selling
pressure is not only fading but is being overtaken by an increase in
buying pressure is that the stock has stretched its streak of higher
intraday lows to nine sessions, starting at the June 6 intraday low of
$25.25 and steadily rising to Tuesday's low of $30.70. And with
Tuesday's intraday high of $32.18, the stock had reached higher highs
the past five sessions and eight of the past nine.
Based on the century-old Dow Theory of market analysis, this suggests
the stock has entered the "accumulation phase," or the first stage of
a longer-term trend upward, as some investors have determined that all
the bearish news has been priced into the stock.
On Wednesday, the intraday low was again higher than that of the day
before, though the intraday high was lower.
In a separate bullish sign, some stock analysts have recently
predicted success for the company. Susquehanna analysts reiterated
their "positive" rating on the shares Tuesday, saying they expect the
stock to rise to $48.
Evercore Partners (EVR) Analyst Ken Sena said in a note to clients
Wednesday the company is likely to start drawing revenue from its
mobile site, among other efforts it is making to increase its
marketing business. Evercore rated the shares "equal weight," saying
that better buying opportunities might emerge in the next six months
with the expiration of lockup periods restricting insider sales of
shares.
"While Facebook may have a rocky near-term journey, the long term is
worth remaining committed," Sena wrote in the note.
Many more Wall Street analysts will likely start offering input on the
stock next week, which marks the end of the Securities and Exchange
Commission-mandated "quiet period," the 40 calendar days following the
deal when analysts from the 33 firms that served as managers and
co-managers of Facebook's IPO are prohibited from publishing stock
recommendations on the company.
Despite its rise, bearish bets on Facebook have continued to mount,
though at a slowing pace. "Short interest," or the amount of shares
short sellers were using to speculate the stock will decline, has
risen to 8.1% of the company's outstanding shares, according to
Tuesday figures from data provider Markit's Data Explorers unit. Short
interest in Facebook quickly shot up to 6.28%, more than double the
roughly 3% average for companies among the Standard & Poor's 500-stock
index, in the days following the company's May 18 IPO. But since then,
the increase has been more moderate. Short sellers borrow shares and
sell them, hoping to replace them by buying shares at a cheaper price
if the stock falls.
Meanwhile, activity in the options market shows some skepticism that
Facebook's recent gains will last. A week ago, total bullish bets
outstanding in Facebook options slightly outpaced bearish ones at a
rate of 1.05-to-1, according to options-data firm Trade Alert. Since
then, new bearish positions have flipped that ratio; bearish bets
outpace bullish ones 1.33-to-1. Over that time, the most actively
purchased option contract was a bet Facebook shares would finish the
year below $20.
Some of Facebook's recent gains have come alongside a recovery in
social-media stocks that have been beaten down recently. Zynga Inc.
(ZNGA), the maker of casual video games such as "CityVille" and "Words
With Friends," was up about 7.6% so far this week, as of late
Wednesday morning, paring a more-than-15% decline the past month.
Online-coupon service Groupon Inc. (GRPN) rose 8.6% week-to-date, also
trimming losses over the past month.
Like many technology companies, Facebook trades at a hefty premium to
its earnings and revenue, suggesting investors have high expectations
for the company's financial future.
Facebook's share price was 60 times higher than its estimated
current-year earnings as of Wednesday morning, giving the stock a
loftier valuation than all but nine of the companies in the S&P 500,
according to FactSet.
A Facebook representative declined to comment on the stock's recent rise.
-Tomi Kilgore, Kaitlyn Kiernan and Anupreeta Das contributed to this article.
Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com
(END) Dow Jones Newswires
June 20, 2012 12:15 ET (16:15 GMT)
No comments:
Post a Comment