A data scandal wiped out $74.66 billion in market capitalization for Facebook Inc. (Nasdaq: FB) the week of March 19, but Money Morning Capital Wave Strategist Shah Gilani still believes FB stock is a “must-own tech darling.”
And it’s one that can still bring in triple-digit profits despite the short-term volatility…
However, there’s a chance Wall Street won’t like what it hears when Facebook reports Q1 earnings on April 25…
The earnings report covers January, February, and March, including the time period of the Cambridge Analytica data scandal, which broke on March 19.
The backlash led to rally cries of “Delete Facebook” across the Internet, and Mark Zuckerberg was hauled in front of Congress for questioning.
While Zuckerberg downplayed the impact of the scandal on Facebook’s business, this earnings call will give us the clearest picture of exactly how it affected Facebook’s revenue and user base.
Some analysts project that Facebook lost 10% of its users, and even more of the remaining users are participating on Facebook less.
A March 21 to 23 Reuters poll found that 51% of respondents do not trust Facebook. In comparison, only 24% of respondents didn’t trust Amazon.com Inc. (Nasdaq: AMZN).
Zuckerberg could even warn shareholders that he expects user growth to fall into the future. With fewer users, advertisers may look for other platforms to buy ad space.
That could create a short-term drop in the FB stock price.
But Gilani isn’t panicking.
In fact, he developed an investment strategy that could lead to triple-digit profits in just three months…
This Facebook Options Play Could Lead to a 100% Profit
Gilani loves Facebook because of its 2.2 billion worldwide user base.
“That’s a lot of customers to target for all kinds of sales,” Gilani said on April 10.
If all ends well, Gilani believes the FB stock price could climb back to its all-time high of $195.32 per share from Feb. 1.
To play this potential upside, Gilani recommends buying the Sept. 21, 2018 FB $190 Call.
It will currently cost you $4.40 per contract, for a total of $440.
As the price climbs closer to $190, there’s a chance of a triple-digit return in just three months.
“I like buying the further-out September calls, because that gives the stock a chance to bump up and down, even take a hit, because bad news always travels faster than good news – and there’s still a chance to recover after the summer doldrums,” Gilani said on April 10.
— Jack Delaney
Source: Money Morning