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The company’s shares punched through the $100 barrier for the first time yesterday, bringing the gains seen since the 2012 IPO to circa 140%. The firm has gone from a ‘punt’ to a surefire performer as they find yet more avenues to derive revenues from its huge user base.
The latest innovation for the firm is the development of in-app advertising experiences, which allow users to view and interact with rich advertising content without being taken out to their browser. The ability to maintain engagement and use of the app is what drives revenues for the firm and thus the ability to close one of the remaining exit-points is a great move for Facebook.
Should its new advertising methods increase both engagement and the length of time a user stays within the app, it will not only drive greater revenues per advertiser but also a greater frequency of advert engagement. More money per advert and more of those adverts being sold means greater profits for the firm going forward. Those effects will likely feed into the Q4 numbers though, less so the Q3 figures which are due on 4 November 2015.
Nevertheless, Facebook has a habit of outperforming expectations when it comes to earnings announcements, with the past five releases beating market estimates. For Q3, estimates point towards adjusted earnings per share rising from $0.50 to $0.52, with sales expected to rise from $4.042 billion to $4.368 billion.
Analysts understandably expect this strong bull run to continue, with 50 buys, five holds, and just one sell recommendation.
From a technical point of view, we have seen an upside breakout through $99.28 resistance to take hold of the $100 mark. Now that we are seeing a pullback to those two levels, I expect them to provide us with some support for another move higher. Irrespective of whether the level holds, the chart would still look bullish as long as price holds up above $96.48 which is a clear notable level.
The future looks bright for Facebook and given the trend in play, it is highly likely that any pullback will be seen as an opportunity rather than a sign of impending weakness.