Facebook Stock Could Hitch a Ride on Apple’s Coattails

Successful iPad Mini could do wonders for the social network

By Jon Markman, Editor, Trader's Advantage and CounterPoint Options


I know, I know. It’s still hard to trust Facebook (NASDAQ:FB), even though it surprised to the upside in their earnings report.

But new releases from Apple (NASDAQ:AAPL) this week could be a real boon to Facebook’s renewed focus on mobile. Says CEO Mark Zuckerberg in the report:

“People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform. At the same time, we are deeply integrating monetization into our product teams in order to build a stronger, more valuable company.”

There’s an important detail about the iPad Mini that should be understood in this context: its size. It’s smaller than an iPad, sure, but it’s larger than a cell phone — which more and more social media users have adopted as their base of operations. And the more the average size of the mobile screen grows, the more room social media companies like Facebook, Groupon (NASDAQ:GRPN) and LinkedIn (NYSE:LNKD) have to serve larger and more valuable ads.

I’m seeing a promising story, especially since Facebook has seen a 20% pop in user engagement on Apple devices since it redesigned its mobile app in May.

It is no coincidence that FB should do better once investors have a chance to see the iPad Mini and contemplate how it might change the landscape for mobile applications that need screen real estate to work their magic.

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What’s more, after the company reported earnings, Facebook stock zoomed up as high as $24.25 before backing off into the close. It still could advance 100% to 300% from here during the next few years if management continues to focus on making money off its best customers rather than just adding low-value customers.

It worked for Amazon (NASDAQ:AMZN). Don’t forget: AMZN was down 50% from its IPO level in its first six months while finding itself in extreme disfavor among the media and mainstream analysts, then rocketed 1,000% from there in the next three years.

So don’t discount Facebook stock just yet. Most likely, it won’t rise as radically as AMZN did because it is far more richly valued at this stage of its life than AMZN was, but it still could surprise people as it learns how to impose its marketing on the smaller screen.

Jon Markman writes a daily swing trading newsletter, Trader’s Advantage. He uses a combination of fundamental and technical analysis to identify which stocks will move quickly.

Article printed from InvestorPlace Media, https://investorplace.com/ipo-playbook/facebook-stock-could-hitch-a-ride-on-apples-coattails/.

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