Facebook's ascent has investors betting on more gains

Tue Jul 28, 2015 2:19pm EDT
 
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By Saqib Iqbal Ahmed

NEW YORK (Reuters) - Investors in social media shares have zeroed-in on Facebook Inc (FB.O: Quote), piling into stock options to add bullish bets on the company in the days ahead of its Wednesday earnings.

Facebook escaped a rout in social media stocks after last quarter's results and its shares are up about 20 percent this year. The stock and a handful of other winners account for the bulk of the S&P 500's .SPX gains this year.

The ascent has made Facebook one of the ten largest S&P companies in terms of market capitalization, with the stock now worth more than $260 billion - surpassing decades-old companies like Wal-Mart Stores (WMT.N: Quote) and Procter & Gamble (PG.N: Quote).

Traders in the options market are betting on more gains for the stock after it reports results Wednesday.

“Facebook is definitely the standout leader in the group,” said Adam Sarhan, chief executive of Sarhan Capital.

“The stock’s recent performance, combined with the company’s leading position, explains the bullishness of the options activity," he said.

Earnings seasons are typically choppy for stocks and even more so for social media companies, due to their high valuations and ongoing concern, in some cases, about their business models.

Last quarter, investors spooked by disappointing results sent shares of Twitter (TWTR.N: Quote), LinkedIn LNKD.N and Yelp (YELP.N: Quote) down by more than 20 percent the week they reported results.   Continued...

 
A picture illustration shows a Facebook logo reflected in a person's eye, in Zenica, March 13, 2015.   REUTERS/Dado Ruvic