The new mantra of investing on Wall Street seems completely new. But in reality it is not that different from the old one in spirit. The goal is still to find opportunities where others see risk. Reddit investors took this notion to a different level. As a result, we now find stocks break records while their business struggle like AMC (NYSE:AMC) to name one. Today we will take it old school and delve into the opportunity in a winning business. Facebook (NASDAQ:FB) stock is the opposite of that of AMC.
The business is strong and showing no signs of abating. Social media took center stage in a big way during the pandemic. Because when people couldn’t meet face to face, they took to cyberspace.
Even the technology holdouts had to capitulate and get with the times. These are habits that will last for years, and the trend continues to accelerate.
The largest company in social media is Facebook. Management gets into hot water often, but that’s because of the scale of its platforms. They service about 3 billion clients, so they are likely to upset quite a few of them. In spite of all the negative publicity, all headlines that caused FB stock dips were buying opportunities.
Currently, it presents a compelling argument to stay long the stock. It is not a flagrant opening, there is support below and opportunity above. FB is about 12% under its all-time high, and there is resistance through the next 5% above. But if the bulls can plow through that, then they can challenge the highs again. Otherwise, dips below $328 per share will find buyers.
I am fairly confident that Facebook will remain a leader in social media. They just established the next wave in the business, which is Metaverse. Therefore, FB stock is likely to also remain atop the top stocks to own. It’s a trifecta of leadership on Main Street, Cyber Street and Wall Street.
Results Support Holding FB Stock
The fundamentals are still healthy in spite of its critics. The critics are dead wrong because you can’t argue with facts and figures. In three years the company more than doubled its revenues. Net income quadrupled in four years to $40 billion. All this and the P/E is barely 20 and price-to-sales under 9.
To the untrained eye, the stock is too high. But in reality, the rapid business growth more than kept up with the stock price.
My conclusion today is that this is a good place to hold shares. Initiating new positions would also make sense, but not all in. The indices are near record levels, so I should taper my conviction level on purpose. The next time public opinion goes against it investors should look for better entry points.
Over the next few years, Facebook will bring about the metaverse. Admittedly I don’t know exactly what that’s going to entail, but my imagination is running wild. I am a fan of sci-fi, and this is starting to look like a self-fulfilling prophecy. Investors should do their own homework in the meantime, and the charts can help.
You’ve Picked Great Stocks
I bet most of you have rarely picked a bad stock. And the losses usually come from questionable timing or bad luck on that front. Therefore, looking at the data in the charts is an essential part of the process.
The support we noted has been in contention since last summer. Back then it was a big top that brought about a September 2020 recession. An identical move just happened this September. In both cases, FB stock found footing at prior pivot levels.
Investors in Facebook or MVRS stock will do well in the long run. Meanwhile, the macroeconomic conditions are still strong, in spite of the pundits’ warnings. High inflation is only a risk when it crimps spending. In the U.S., consumer spending is at a record pace and it is two-thirds of the economy.
Furthermore, the Federal Reserve is still friendly to equity prices. They just started their taper process, so the QE will last for another eight months at least. Rate hikes are far out and I doubt they will be aggressive. The Fed tried that in 2018 and quickly chickened out.
The elephant in the room is the White House. They are dumping trillions into the system, which will take years to burn off. Future generations will suffer greatly from this, but for now it keep stocks afloat. Within that, Facebook stock remains a solid bullish thesis.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.