Facebook (NASDAQ:FB) has had a hot hand during the past several months, and the company is looking to ramp things up again heading into its fiscal fourth-quarter earnings report at the end of the month. Specifically, Facebook ripped a page out of Apple’s (NASDAQ:AAPL) playbook by sending out press invitations to a company event at 10 a.m. on Jan. 15.
The catch phrase on the invites crooned, “Come and see what we’re building.”
Facebook has rolled out a plethora of updates and features during the past year, many of which did not warrant their own press conferences. In fact, the last time Facebook held a media event, the company announced Facebook Gifts and the companies that would be partnering with on the service.
Click to Enlarge Apparently Facebook is doing something right, as shares have been on fire during the past four months. Specifically, since hitting a low of $17.55 in early September, FB has surged more than 76% — nearly shaking off the stigma of the stock’s horribly handled IPO. On Wednesday, FB broke out above the $30 area, a region that provided support in June/July last year. Look for the shares to once again utilize $30 as a support level.
Sentiment continues to improve for FB, with Wall Street doling out 23 “buy” ratings, compared to 10 “holds.” Meanwhile, the consensus 12-month price target arrives at $31.96 — a considerably modest premium to the stock’s close at $31.30 on Thursday. Any upgrades or price-target increases could provide additional upside pressure for FB shares.
Elsewhere, short sellers appear to be jumping ship in droves. After peaking at 95.3 million shares in mid-November, short interest plunged 72% to 55.16 million shares. Should this short-covering trend persist, it could provide a continued tailwind for FB.
Still, given the growing optimism surrounding Facebook and the company’s firming fundamentals, traders might want to consider a bull call spread as a way to profit from the stock’s strong price action. With FB trading just above $31, a February 31/33 call spread looks promising.
At the close of trading Thursday, this trade was offered at 89 cents, or $89 per pair of contracts, placing breakeven at $31.89 — a gain of about 1.9% from yesterday’s close. A maximum profit of $1.11, or $111 per pair of contracts, is possible if FB closes at or above $33 when February options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.