Facebook (FB) stock price fell slightly on Wednesday, ending the previous four straight day advance. But this small decline did not weaken Facebook’s more than 20% gain momentum over the past two weeks.
Facebook stock price slipped 31 cents, or 1%, to $31.60 per share on Wednesday. But since the big loss on June 5, Facebook stock price has achieved a considerable rebound, and recovered most of the lost territory since the Facebook IPO. The rally movements were stimulated by multiple factors.
Brokers and other market participants speculated that this round of rally in Facebook stock price was partially due to that investors had ended the initial aversion to Facebook stock. According to statistics, the sentiment of the bullish investors is rising. Those investors bought around $30 per share and sold with aggressive strategies have disappeared. The number of the negative reports about the technical failure of Facebook IPO on the Nasdaq Stock Exchange have significantly reduced, easing the investor concerns over Facebook stock.
With the decline in negative news, Facebook began to expand the business. The company said this week that it has agreed to acquire the facial recognition entrepreneurial company Face.com. Facebook also announced that measures will be taken to strengthen the non-advertising business. The company will allow users to use the local currency to pay developers for the game or application, instead of the previously U.S. dollar peg payment system. Facebook also plans to allow application developers to charge users through a subscription model and Facebook will get 30% of the fees from the third party developers.
Investors start to hold Facebook stock for a number of days, and they has begun to trust Facebook. In addition, the earlier Facebook stock price tumbles also create opportunities for the rebound. Facebook stock price touched a high of $45 per share in the first day trading, but fell down quickly, to the lowest level of $25 per share in the following days.
Technical analysis also explains why Facebook stock price rose. The selling pressure on the shares has receded, and been replaced by buying pressure. According to Dow theory, this means that Facebook stock has entered into the “accumulation phase”, the first phase of a long-term upward trend, because some investors found that all the bearish factors had been reflected in the share price.
Some stock analysts predicted Facebook stock price will continue to rise recently. Susquehanna analyst on Tuesday reaffirmed the bullish rating on Facebook, and set the Facebook stock price target at $48 per share. Facebook has begun to generate revenues from the mobile business; meanwhile it also takes other measures to strengthen the advertising business. As the employee shareholder lockup period ends, there will be more better buying opportunities within the next 6 months.
With the recent gains in Facebook stock price, those companies were dragged down by the poor performance of the Facebook IPO also rebounded. Social gaming company Zynga (ZNGA) was up 5.9% this week; this stock lost more than 15% last month. Online group buy company Groupon (GRPN) saw its shares rising 6.1% this week, and the shares also took a nosedive last week.