Facebook Inc (FB) Stock Hits Record High; Post-Earnings Volatility Possible


Facebook Inc (NASDAQ:FB) shares closed Thursday at an all-time high of $80.04. It gives the company a valuation of over $208 billion. Facebook’s previous record high was $79.04 on September 30. The stock has rallied close to 49% this year so far. The company has impressed investors with its successful transition into mobile advertising.

Facebook Inc (FB) Stock Hits Record High; Post-Earnings Volatility Possible

Facebook’s (FB) earnings expected to rise 61%

The social networking giant is scheduled to report its fiscal third-quarter on Tuesday, October 28 after the market close. Analysts on average expect the company to post $3.12 billion in revenue, up 54.70% from last year. Earnings are expected to skyrocket 61% to 40 cents per share. Facebook investors are used to post-earnings wild swings. For instance, the stock rallied to a new all-time high after the company reported its Q4, 2014  results in July.

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Investors expect little volatility when the company reports its earnings next week. The cost of a Facebook Inc (NASDAQ:FB) straddle indicates 7% movement in either direction by October 31. By comparison, Facebook stock has moved 10% on average after quarterly results in the last eight quarters. WhatsTrading.com options strategist Fred Ruffy said the straddle looks cheap.

Facebook (FB) may witness post-earnings volatility on WhatsApp

However, the stock could witness post-earnings volatility on WhatsApp, according to Bloomberg. Facebook Inc (NASDAQ:FB) shares are up about 14% since the company agreed to acquire WhatsApp for $19 billion. About 178 million shares of the social networking giant are set to flood the market next week as lockup on shares sold during the acquisition expire. Goldman Sachs analyst Heather Bellini expects those shares to become available for trading in 2-3 days following Q3 earnings.

Availability of new shares could add to volatility. To offset any losses, Goldman Sachs recommends buying a bearish put option and a bullish call option with an exercise price of $79, expiring next month.

Facebook Inc (NASDAQ:FB) shares fell 0.68% to $79.49 at 10:08 AM EDT on Friday. On Thursday, the stock’s 40-day implied volatility was at 40.53%. It implies that investors don’t expect wild gyrations next week.

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