After what many considered a disastrous IPO, investors have largely been able to forgive and forget the extreme hit the share prices took right out of the gate. Since reaching its nadir two years ago FB shares are up over 350%, 42% this year alone. Despite the market’s recent dip, FB is making new 52-week highs (see chart below).
That track record is important to those investors who have currently
been made nervous by the big drops this season from stocks like Amazon
(AMZN), Netflix (NFLX), IBM, Tesla and the recent miss of expectations
by the nearest stock in the social-networking space, Twitter (TWTR).
They won’t have patience for bad news and have likely even dampened
expectations heading into the earnings report. However no one is
anticipating seriously bad news from Facebook.
Option sellers are currently pricing in a seventy percent possibility
of a five dollar move. This is not an unusually large move, and it has
some interesting boundaries. On the downside this wouldn’t even bring
the price of the stock to the level of previous price support. A
positive move would gap the stock to new highs. Either way it would seem
to spell the continuation of an upward trend.
This anticipation of a mild move by option sellers is a stark
contrast to the option pricing yesterday before Twitter released its
quarterly results. Options on TWTR shares priced in a high probability
of a ten percent or greater move. This implies that Facebook investors
are rooting for the company and its stock, not feeling the need to buy
much protection through earnings.
Why not? Zuckerberg’s management of the company has led to seven
quarters with no earnings misses. Corporate guidance has kept
expectations in check, and the company has been teflon to bad news
related to security concerns or user data studies by the company.