Facebook the Next Big Winner?

By Tuesday, February 26, 2013

260213_PC_leongGoogle Inc. (NASDAQ/GOOG) traded above $800.00 on February 19, and I still can’t believe I missed out on an early investment opportunity when the stock first debuted at $100.00 in August 2004. The company has become the king of the Internet space and the favorite of retail and institutional investors in the equities market. In fact, Google now appears to be the new Apple Inc. (NASDAQ/AAPL), which has disappointed investors and is sliding downward on the chart. (Read “Mr. Cook Better Have a ‘Plan B’ for Apple.”)

The comparative stock movement of Google versus Apple in the equities market is obvious on their stock charts. While Apple has continued to slide lower since trading at over $700.00 in September 2012, Google has moved in the opposite direction, with its recent breakout above $800.00, based on my technical analysis.

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Chart courtesy of www.StockCharts.com

Going back to September 2012, Wall Street was so hyped up on Apple in the equities market that several analysts started to assign a $1,000 price target to the company, suggesting Apple would be the first $1.0-trillion company in the history of the equities market. Of course, it didn’t quite pan out that way.

On the other hand, just as we had seen with Apple in September, we are now seeing euphoric analysts jumping all over Google, highlighted by a $1,000 price target from Bernstein Research.

While I’m not convinced Google can reach this magical peak within a year, I do feel the stock will inevitably trade at $1,000, unless the company decides to split the stock. But then again, co-founders Lawrence Page and Sergey Brin may have the ego to want to be the first $1,000 stock, only to follow it up with a stock split.

So, which companies could be the next big winners?

There may be a buying opportunity in Facebook, Inc. (NASDAQ/FB), which traded at a low of $17.55 on September 4, 2012, before rallying to $14.96 a share, or increasing a whopping 85%, to $32.51 on January 28. The stock has since retrenched below $30.00. The question is: could Facebook be the next Google? The company is, in my view, the top social media stock in the equities market.

Facebook is exciting investors with its new plan of generating revenues from its one billion subscribers in such areas as mobile advertising. The reality is that Facebook has an impressive one billion pairs of eyeballs that can be extremely valuable if a sound strategy is executed. Again, I would look to accumulate on price weakness down to the low-$20.00 level. The company’s biggest threat is Google in the equities market.

But be careful with Facebook. The company’s stock chart below shows weak relative strength and a descending triangle, which was preceded by a bearish double-top. Failure to hold at the support reflected by the horizontal blue line could see the stock slide downward to $25.00 or below, where I would see an aggressive buying opportunity for speculative investors in the equities market.

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                                                                 Chart courtesy of www.StockCharts.com

But as we move forward, my belief has not changed. I continue to feel that the top growth area in which to make money in the equities market will continue to be the technology sector.

I believe the areas that will offer the best stocks opportunity in the equities market are mobility applications for tablets and smart phones, as users shift away from more cumbersome personal computers (PCs) and laptops.

Success in the equities market is all about innovation.

Take a look at some of the smaller technology stocks that develop solutions for mobile applications, including Synaptics Incorporated (NASDAQ/SYNA), 8×8, Inc. (NASDAQ/EGHT), and Glu Mobile, Inc. (NASDAQ/GLUU) in the high-risk speculative area.

Please note: none of the stocks mentioned in this article are buy recommendations; rather, they are examples of stocks that you may want to look at in the technology sector.

About the Author, Browse George Leong's Articles

George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »