Facebook’s (FB) 15% gain yesterday, equaling about $45 billion in market capitalization in one fell swoop, makes sense on one level because they were undeniably a fantastic set of results. But they are surprising against the backdrop of a challenging global economic environment. I had some thoughts yesterday on skepticism and contrarianism when it comes to judging a company’s ability to deliver results that would outweigh investor caution about high growth stock valuations.
The nearly $60 billion market cap move from last week’s lows at $90 to yesterday’s intra-day high at $110, (matching its all time highs) does not reflect any realistic or constructive trend in the current market environment, And to be honest, it’s a bit unsettling in what it says about the broader market. If some were uncomfortable with the concentration of performance in 2015 among a handful of mega-cap technology stocks, the loss of leadership of the innards of FANG in 2016 like Amazon (AMZN) and Netflix (NFLX) should be disconcerting, making FB an outlier and placing a massive amount of pressure on Google to deliver when they report Q4 next week. I’ve doing this whole trading thing a longtime, and I can assure you, FB’s recent stock performance is not normal, especially in the market that we are in:
And like not reading too much into FB’s new highs, before we all get too beared up on AMZN’s disappointing Q4 results (the stock is down 10% in the pre-market), remember the stock was up nearly 9% yesterday. And from a purely technical standpoint, if you think the jig is up for AMZN stock, you might consider waiting for a bounce to sell or short, as the stock will likely find some near term support at last week’s low near $550:
Monday night after the close, GOOGL will report Q4 (they don’t guide) and this might be the single most important report from here on out as it relates to market sentiment. If GOOGL fails to reassure investors that Growth at a Reasonable Price (GARP) is a worthwhile investment strategy, then we can start to discount FANG’s out-performance over the last year, and call it what was, a massive broad market head-fake, an aberration.
While we are looking at charts, my eye also sees last week’s low in GOOGL at $688 as a massive psychological support level, which was almost to a dime, the gap level from late October when the company offered blow out Q3 results: