Facebook Inc. (NASDAQ:FB) is having a splendid day and an impressive start to the week. Facebook with its market capitalization of $236.59B is a social networking website company. The Company’s mission is to give people the power to share and make the world open and connected. The stock is one of the few tech stocks that have a consistently bullish momentum. Facebook is not relenting in its bullish ascent today.
As at 12:15PM EDT, the shares of Facebook were trading up at $84.28 having gained 2.15% in the morning session. The stock has gained 30.79% in the last one year. It has gained 8.13% in the year-to-date period. It has gained 4.82% in the last one month. This impressive performance contrasts sharply with a gain of 2.1% gain recorded in the S&P 500.
Update on Previous FB Calls
On March 2, I wrote an article titled, “FB Call Options Are Red Hot Today, Buy on the Dip“. In that piece, I talked about Facebook’s inability to monetize its user base. I also talked about the potential upside in Facebook’s advertising business. I concluded that piece by recommending that you buy the FB Oct 2015 70.000 call (FB151016C00070000) at an asking price of $10.
When I wrote that article, I effectively recommended buying the contract at $10. As at 11:51AM today, the contract was trading at $15.53 and it was commanding an asking price of $15.40. In essence, the contract has gained 54% in three months.
Still on Facebook’s Ad Business
This morning, Reuters reported that Facebook is gaining serious momentum in it video advertisement business. The impressive momentum that Facebook is recording in its video ads business might be the firm’s key for taking on Google’s YouTube. Experts suggest that Facebook’s video platform might actually be better than Google’s YouTube in terms of reach and contextual reference.
In addition, Facebook has surpassed Google’s YouTube in its number of Monthly Active Users (MAUs). Facebook now has 1.4B MAUs compared to YouTube’s 1.3B MAUs. Television Ads might soon be replaced entirely by online ads and this is where Facebook stands to obtain massive returns.
My Previous Thesis Still Holds
Facebook is free and it always be free according to the company’s mission statement. However, if Facebook generates $1 per month from its 1.4B active users, the company will be able to generate $1.4B per month and a conservative $16B annually.
In that original March article, I said that
“Facebook’s currently huge and growing monthly active user base provides advertisers a great opportunity to reach out to their target audience beyond what its normally possible by placing ads on traditional mass media. In fact, in June 2013, Facebook has 700 million videos viewed per month and the number of videos viewed per month on Facebook has soared to 12.3 billion by August 2014.
Hence, advertisers will be more inclined to place their ads on Facebook, the increase in Facebook ads will in turn encourage more advertisers to come on board Facebook to create an unending circle of revenue from ads.”
How to Trade FB Options
The shares of Facebook are clearly in an uptrend as the stock trades above its 50,100, and 200-day moving averages. I am optimistic about the prospects of the stock and I recommend buying FB call options. You’ll do well to consider buying the FB Oct 2015 85.000 call (FB151016C00085000) at an asking price of $4.20.
— Daily Option Alerts