Hey guys how's it going it's Andy from MagooInvesting. Happy Wednesday. I was planning
on taking today off. I woke up this morning, doing my own thing, was sipping my coffee,
and then I checked the market. I saw that all of the social media stocks were up pretty big today.
And that makes a lot of sense. Yesterday's video we talked about how incredible of an earnings
report Snapchat had. And if you missed that I'll link that above right now. Towards to the end of
that video I talked about what I expected the rest of the sector for the social media stocks
to do. And I'll roll that right now. Right now I definitely have missed out. The stock has done
very well and I'm very happy for the company. And it should be a positive sign for the rest of the
social media stocks out there. And so I thought I was pretty smart saying that, but it appears like
the overall market kind of agreed with me. So at this point most of the social media stocks are up
almost double digits at this point. I was planning on waiting to talk about Facebook until the end of
the week. Just to wrap up the week with the giant from the social media sector. But today I wanted
to really talk about why I think Facebook is my favorite stock to buy right now. Unlike most of
the videos that I've done in the past couple of months, we're going to be spending most of
the time on the computer. Because I'm mainly a technical trader and what that means is that I
look at the stock charts to be the number 1 factor in deciding when I'm going to start investing in
a stock. And when I looked at Facebook stock the charts were very just absolutely beautiful. And
this is probably the most attractive chart I've seen in a long time. So I'm really excited to
show that off. But before we get started I have to say that I'm not a licensed financial adviser and
this is not financial advice. Anything you see in this video is just me giving my own
opinion on Facebook and you need to do your own research before making any investment decisions.
With that out of the way, let's hop onto the computer and I'm going to show you why I think
Facebook is probably the best stock market buy out there for my stock market portfolio. Alright so
before we get talking about Facebook I wanted to show what's happening in the rest of the sector.
Yesterday we talked about Snapchat and that was a really fun video. And we started off the video
talking about how snapchat was in an upward channel. If things went poorly I was hoping
to see it bounce off the bottom. As we zoom in on here, it just gapped up significantly. So now I'm
going to be waiting for a gap fill on that on. But that's not what I wanted to show. It is up 33%.
Then you go to Twitter (TWTR Stock). Twitter is up 8%. Pintrest (PINS Stock) is up 9% and then we
go to Facebook. Just like yesterday I'm going to start with no drawings being on the chart. Because
I kind of want to show what it looks like with nothing on here. In the past when I've talked
about technical analysis for how I want to take trades, my eyes just lit up when
I drew this yesterday. I was going to plan on making this video towards the end of the week.
But with the fantastic news from the snapchat yesterday pushing up the rest of the sector up,
I thought this was a better time to do it. When I put up my drawings, it looks a little cluttered.
First I always chart out of the bottoms. This is from the pandemic and then we saw it bounce back.
But the thing I really want to point out and the reason why I think Facebook is one of my favorite
opportunities right now. And is probably is the best buy in opinion is upward channel. This upward
channel has been respected from the top side. This is back in July of 2017. came up here and gapped
down . Respected it. And then it came back up here. Whenever I have a stock that falls out of a
channel that I'm in, I like to keep it just drawn to see what happens. Because it's often respected
in the future. And as we can see, this channel was respected from the bottom side
multiple times. So this is early May of 2019, July of 2019, Jan of 2020, and then it came up
here and it took a long time to get over here. And what pushed it back up into the channel?
Earnings report which is a huge catalyst which is what I've always talked about on this channel.
And then it came up here to its recent highs back in late August.
And it respected it again. So this is a very solid upward channel and for someone like myself
that loves technical analysis. And loves taking trades based off of price movement. This was super
attractive to me. So then when I zoomed in over here and I saw it get really low to this area,
I had this charted on Monday and I was really excited to talk about this. And now with this
catalyst and upward momentum from the great news from earnings, I think Facebook is a
fantastic opportunity right here. Based off of the movement to the potential top of this
channel you have an 8% profit there. SO that's pretty attractive. And based off how well this
has been respected I really like Facebook right now. One of the problems that I do have is that I
like trading stocks that get beaten down after bad news. And the reason that I like doing that
is because it gives me an opportunity to trade options on them. And another problem with trading
options on something like this. First off stock market is the most accessible it's ever been.
So pretty much anyone can get in. Facebook is a relatively expensive stock and the only part of
investing that it kind of hinders come from options. Because I would have to be able to
buy 100 shares of Facebook and I cannot do that. That's one of the reasons why I like some of these
cheaper options and especially with an upward channel, it's hard to draw a steady support
as time goes on that support just continues to increase over time. So it's harder to plan out
that way. From this upward I'm loving this trade right now. I'm going to set an alert down to the
225 just in future you never know if it's going to hit that. But based off this upward channel
is so attractive. And we have everything going for it. We have the upward channel that has been
respected from inside and outside the channel. You have a catalyst from the earnings report
that pushed it back through this resistance that it was having a tough time breaking through.
The highs touched it, fell back down, and we're getting this huge news catalyst that is pushing
the stock up. Everything on the charts, everything with the news, looks fantastic for Facebook.
And I think it's probably the best opportunity that I've seen in the stock market right now.
Obviously there's potential as I mentioned with the Snap video yesterday that after great news
like this, things could go up for a couple of days and then sell off for a little bit. So
I'm not going to be taking position right now. Earnings report for Facebook should be by the end
of the month. So if it falls in the next couple of days I'm going to look to take a smaller position.
I can buy a couple shares. Obviously I can't buy 100 shares to take advantage of an options play,
but if it does fall back to this support I will likely take a position because everything on
this chart looks beautiful. And I think it's probably the most attractive trade I've seen
in a long time. So now that I've shown what's on the charts I know a lot of people want to know
some more about the company. But it's Facebook so most people know what Facebook is. I mean there's
2 billion people that use the platform. So I feel like everyone knows what it is. But I wanted to
talk about some of the numbers and some of the past earnings reports to talk about the trajectory
of the company and where I expect Facebook to be in the future. So their last earnings report was
July 30th and based off of that and the prior earnings before they. They haven't officially
announced it yet, but earnings going to be likely be towards the end of the month. SO we're getting
pretty close. Normally I like waiting to see what happens with an earnings report before I
buy into a stock. Just because earnings reports is such a huge catalyst that can make a stock move
up significantly or fall significantly. We saw that yesterday with Snapchat. But based off of
the positive numbers mainly from the ad revenue, I expect Facebook to do relatively well. And so
similar to snapchat, 98% of their revenue for Facebook comes from Ads. So this is a majority
of their business and is the most important thing going forwards. And with these summer months,
the pandemic, the ad spending going down, a lot of the social media stocks had a tough time with
their last earnings reports. However, Facebook was not really one of them. The last earnings report
was pretty good. When you compare that to the other social media stocks, it looks really good.
But Facebook is one of these giant companies that usually gets compared to stuff like Apple,
Amazon who had fantastic earnings reports as they were able to take advantage of the
pandemic and people staying at home more. But Facebook earnings report was fantastic.
We saw ad drops across the entire sector but they had positive net income of 5.2 billion dollars.
They don't have to worry about profitability like I talked about with Snap. Snap yesterday
posted a surprise positive earnings per share but I don't consider that profitability. I look
at net income. Net income for Facebook has been fantastic. Their operating margin increased to 32%
from 27% so they're making more money and they're being more efficient with how they're making it.
There are some things going forward with Facebook that I do want to watch. We've had
a lot of rumblings about anti-trust allocations against the major tech companies in Google,
Amazon, Apple, and Facebook. And so on Tuesday we did have the first move with
that when the Department of Justice did sue Google for having anti-trust allegations.
Basically it comes from their practices for how they use their search engine. This is going to
be interesting going forward however I'm not super worried about this for investing in something like
Facebook. The major giants of Apple and Google seem to be in the cross hairs of the Department
of Justice and Facebook just seems to get tagged along because it's one of the tech giants. So I'm
not super worried about that. But based off of that, the tech stocks, the major tech stocks do
have a little bit of a target on their head and that's one of the reasons why I prefer the smaller
social media stocks. Specifically Snapchat and Twitter because I think they have a lot of upward
potential and they don't have as many things that could be taking them down like the US government.
So looking at Facebook Books, you don't really have to see very much of it. This is a very
impressive company but I would just show what jumped out to me. When we look at Revenue growth
it has been incredible over time. When you look at the bottom of this chart that I have up right now,
the year over year growth looks like it's shrinking. But that's just because Facebook has
growth at such an incredible pace that they've double digit year over year growth for revenue
every quarter since they've gone public. In the past quarter that was the lowest growth
that they've had overall. It was still a 10.5%. So that is pretty much any company would be happy to
take that kind of year over year revenue growth. Facebook is incredibly profitable as I mentioned
earlier. Last quarter they had 5.2 billion dollars in net income and in all of 2019 they brought in
18.5 billion dollar. They have 110 billion dollars in shareholder equity and no long term debt.
So there's no debt to equity ratio because they have very little debt or even no debt.
And the most important part for social media stocks to me comes from user growth and Facebook
has done an incredible of growing their user base even though it feels like at this point they can't
get any bigger. So in the last quarter they had a 12% year over year increase for Facebook with 1.8
billion users using Facebook. And then across all of their platforms that includes What's App
and Instagram, they had a 14% increase to 3.14 billion users.
Facebook is just incredible with the scale that they've been able to reach.
Going forward I think that the best part about the company comes from their stock price.
And the price movement over time. The charts are incredibly beautiful and as I mentioned
that upward channel gives a fantastic way to trade this stock. Going into earnings I am a little bit
worried. If Snapchat hadn't released earnings I would have been a little curious to see what was
going to happen. But based off the snap earnings I do think that this gives a green light for someone
like myself to buy in. As I mentioned on the chart discussion that I'm going to be waiting until
hopefully the stock fades a little bit. Usually having a little bit of momentum
things get really excited, the stock goes up, and then it fades a little bit.
Hopefully it's going to drop down a little bit and I can get it at the price I want. I think that the
catalyst from the next earnings report is going to be fantastic. Something I'm watching is, you often
see this where the expectations get raised based off of another performer in the sector. And that
may raise the expectations higher than they should be. Snapchat had the benefit, which actually was
to their detriment in the first place with their last earnings report where they released slightly
worse than expected earnings. This quarter this got to take advantage of that. It will be
very curious to see if that raises expectations for facebook to a level that they can't reach.
Based off the numbers that I shared in this video, they pretty much always meet expectations. So I'm
not very worried about Facebook. For a long term it will be very interesting to see what
happens with the anti-trust stuff, but on the shorter time I love Facebook right now. And
I'm very curious what you guys have to say about it in the comment section down below.
Thanks for watching this video, I appreciate the support, and I'll see you in the next episode.