There’s strong reason to believe that Facebook surged because analysts at BTIG gave Facebook a buy rating and a price target of $117. Richard Greenfield, an analyst at BTIG, expects Facebook to have better-than-expected performance for the second quarter because of the potential behind video advertising.
Morgan Stanley analysts also gave a bullish outlook on the stock, increasing their price target from $94 to $110. Piper Jaffray analysts revised its target price from $92 to $120 in June.
Even the folks over at Bloomberg polled analysts on their opinion of Facebook stock. Out of the 54 analysts, 47 rated Facebook a buy, six rated it a hold, and one lone analyst rated it as a sell.
So far this year, $FB has risen over 23%, compared to the less than 1% return of the Dow Jones.
The question is: Will the stock go higher?
The answer is: I’m not sure.
It would be easy for me to say “Of course it’ll go higher, look what all the analysts are saying!” but I’m conflicted. The tech/social media stocks look like they’re in a bubble, and my contrarian senses are tingling because everyone and their mama seems to be bullish on Facebook.
My fundamental side is screaming no, while my technical side is screaming yes. Facebook stock currently has a P/E of 98, way above my “15 or below” value-investor ideals. However, it’s in an obvious uptrend and could go much higher if investors keep pushing it.
Stock pickers and analysts alike point out Facebook’s untapped potential with Instagram, Whatsapp, etc. While it’s a valid point, I like to wait until something actually happens and then form an opinion based on investor response. For example, if positive news comes out and the stock declines, that’s a pretty bad sign.
So, what’s my verdict? I wouldn’t get involved with Facebook stock, long OR short. I’m going against the experts with this one, but I just can’t honestly say I’d buy $FB. I can see it going a little bit higher, but it’s too far into the uptrend and I’m pretty cautious about buying at the peak.