Facebook Inc (FB) Draws Skepticism in Options Market for 2015

Facebook (FB)

Facebook Inc (NASDAQ:FB) is drawing skeptical outlooks in the options market for 2015,  after rallying to a surge of as much as 195 percent in two years. The social media giant, which recorded a 14 percent surge last year, is facing the challenge of continued growth, according to Eurof Uppington of Lombard Odier Investment, in an earlier Bloomberg report.

Uppington stressed the need for Facebook Inc (NASDAQ:FB) to “invest in growth to overcome the law of large numbers.” The social media platform, known for having over 1 billion users worldwide, has seen an increase in operating costs starting from the first quarter of 2013, as per data compiled by Bloomberg.  Bloomberg data also indicates that Facebook is within the top 10 stocks in the S&P index of 500 stocks among analysts favorites. It is also the most expensive stock, with shares valued at 42.5 times higher than actual earnings as against the 16.2 average for stocks within the S&P 500 list. An implied volatility data compiled by Bloomberg covering a period of three months shows that options having exercise price 10 percent lower than shares cost 3.1 points higher than calls, peaking to 3.3 points higher on December 23, as against the 1.3 average for the year.

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With some analysts relaying a forecast of slower growth for Facebook Inc (NASDAQ:FB) this year, there is still positive opinions regarding the stock, with various investment analysts believing that Facebook will outperform the market. A Financial Times survey of 42 analysts offering 12 months price targets puts the stock price at the range of $105 at the highest, with median estimates at about $90, and the lowest at $57.54. This echoes with the sentiment of Ken Sena, an Evercore ISI analyst quoted by Bloomberg, who thinks that Facebook’s “potential for future revenue growth” is still an “attractive story”.

On the other hand, some analysts believe that initiatives taken by Facebook Inc (NASDAQ:FB), such as in the area of video advertising, will see the company through a steady revenue growth. Earlier last year, the social media giant also completed a $19 billion worth acquisition of WhatApp. It also bought Instagram for $1 billion in 2013. These moves, according to analysts, can help the company build stronger appeal to younger users as well as generate more sales in mobile advertising.

This article has been written by Nonito Guntan.

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