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Technology

Should You Really Go Short on Facebook Inc (FB)?

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The general stance of Facebook is bullish, while only a few houses feel the stock is overvalued

Yesterday, TheCountryCaller discussed the views of Citron analyst Andrew Left, who has a bearish stance on Facebook Inc. (NASDAQ:FB) and said that the company is facing tough competition from rival Snapchat. Andrew argued that the social media industry is highly disruptive and Facebook may not be able to sustain its position. While he may be having his own views with regards to the company, we will try to examine Facebook from both a technical and fundamental perspective and determine if a short position in the stock is worth it.

On technical grounds, Facebook Inc. has a Relative Stability Index (RSI) of 40, which means that the stock is currently in a Neutral position, though sellers are relatively strong. The stochastic RSI, which is a more realistic indicator than RSI, highlights that the stock is in the oversold region. That being said, yesterday’s low range of Facebook was near its support level which indicates that buying was done at that level. So as far as the technical indicators say, Facebook is a Buy technically.

Moving on to the fundamentals, the company is trading at a P/E multiple of more than 70. Facebook has impressive profit margins and a decent ROI. The company is also efficient in its operations and has also been investing into growth opportunities for the future. The 12-year-old social networking giant has a market cap of more than $330 billion, which indicates its charm among investors.

Now let’s take a look at the main influencers for investors, the street houses. There is a generally bullish stance by brokerage analysts on the stock. SunTrust and Piper Jaffrey have recently given “Buy” rating to the stock with TP of $135 and $170, respectively. Meanwhile, only a few analysts such as Simon Baker of Societe Generale Bank agree that the stock is highly overvalued and its fair value should be $71. Let’s see if it can regain in today’s trading session. Shares of Facebook were down 0.3% to $114.60, with a volume of 10 million shares traded in yesterday’s session.

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