4 Reasons Facebook Will Close Higher This Week

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

It's easy to bash Facebook (Nasdaq: FB  ) these days. Shares of the world's leading social networking website operator closed last week at $19, exactly half of its May IPO price of $38. Skepticism is thick, and doubts about Facebook's long-term viability and plans for mobile monetization weigh heavy.

However, with earnings season just around the corner -- hello, Tuesday -- and an overpriced IPO now officially available in a half-off sale, maybe it's time to start warming up to Facebook.

Let's go over a few of the reasons Facebook should come through with a strong week.

1. Earnings should soothe the bulls
This is only Facebook's second quarterly report as a public company, and it will be the first time it was public during the entire period covered in the call.

There's really no reason to be worried about Tuesday's results. Facebook had no problem meeting Wall Street's profit target of $0.12 a share three months ago, and the market's $0.11 forecast for this report shouldn't be much of a challenge. Despite any long-term concerns about the sustainability of Facebook's booming popularity, it remains a very profitable company working on ridiculously fat net profit margins.

Until Facebook gives investors a reason to panic about its financial fortitude, don't panic.

2. The upside to Google's downside
Shares of Google (Nasdaq: GOOG  ) took a hit after surprising investors -- in more ways than one -- with its uninspiring quarterly report on Thursday.

The social-networking website with a whopping 955 million active users took a hit as Google's numbers hit the wire. A shocking 15% drop in cost per click weighed on the world's top search engine, but why didn't the market applaud the 33% surge in clicks that were generated?

Everyone seems to be concerned about how mobile users aren't as engaged or as click-happy as PC users are, but Google's sheer volume of ad consumption proves that folks are still drawn to targeted marketing.

3. Facebook is cheaper than you might think
Was Facebook worth $104 billion when it went public? The market's reaction in recent months answers that easy question.

Is Facebook cheap? No. However, it's not as expensive as you probably think. It may not seem to be a screaming bargain at 40 times this year's earnings and a little more than 30 times next year's projected profitability, but it's growing fast enough to justify these kinds of valuations.

Perhaps more importantly, this is the ultimate scalable model. Every incremental user on Facebook is more profitable than the one that came before. As Facebook turns on the spigot of monetization -- and it's starting to do just that -- the earnings growth will be explosive.

4. Don't fear the mobile future
Why do you think Apple (Nasdaq: AAPL  ) -- in its latest iOS update last month -- made its native offerings more integrated with Facebook? Apple realizes that Facebook is the way people connect and share with one another, and its own failings with Ping as a social music platform led it to concede the throne to Facebook.

Android phones are deeply tethered to all things Facebook, and you know Microsoft (Nasdaq: MSFT  ) is going to make the most of Facebook in Windows Phone 8. Heck, Microsoft is an investor in the company!

So if all of the leading mobile platforms are validating Facebook, why are investors so scared? Yes, small screens leave little room for ads, but that's also the brilliance of Facebook's Sponsored Stories, as major brands pay up to get noticed in viewer feeds.

In case you didn't notice, Facebook is also about to raise the bar when it comes to search.

Facebook is commanding half the price it did five months ago, but it's really so much more of a company these days.

A world of opportunity
There's a new premium report on Facebook detailing the opportunities and challenges in store for its shareholders. The report includes a full year of updates, so time's ticking. Check it out now.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Facebook, Google, and Microsoft and has option on Facebook. Motley Fool newsletter services recommend Apple, Facebook, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2067466, ~/Articles/ArticleHandler.aspx, 5/24/2016 10:26:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated Moments ago Sponsored by:
DOW 17,678.28 185.35 1.06%
S&P 500 2,069.17 21.13 1.03%
NASD 4,826.59 60.81 1.28%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/24/2016 10:09 AM
AAPL $97.28 Up +0.85 +0.88%
Apple CAPS Rating: ****
FB $116.47 Up +0.50 +0.43%
Facebook CAPS Rating: ***
GOOGL $726.80 Up +9.55 +1.33%
Alphabet (A shares… CAPS Rating: *****
MSFT $50.90 Up +0.87 +1.74%
Microsoft CAPS Rating: ****