Will Facebook Rise on Recent News?

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With shares of Facebook (NASDAQ:FB) trading around $69, is FB an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Facebook is engaged in building social products in order to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family to discover what is going on in the world around them, and to share and express what matters to them with the people they care about. Developers can use the Facebook platform to build applications and websites that integrate with Facebook to reach its global network of users, building personalized and social products. Advertisers can engage with more than 900 million monthly active users on Facebook — or subsets of its users — based on information they have chosen to share.

Facebook is buying mobile messaging service WhatsApp for $19 billion in cash and stock, by far the company’s largest acquisition and bigger than any that Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), or Apple (NASDAQ:AAPL) have ever done. The world’s biggest social networking company said Wednesday that it is paying $12 billion in Facebook stock and $4 billion in cash for WhatsApp. In addition, the app’s founders and employees — 55 in all — will be granted restricted stock worth $3 billion that will vest over four years after the deal closes. The deal translates to roughly 11 percent of Facebook’s market value.

By comparison, Google’s biggest deal was its $12.5 billion purchase of Motorola Mobility, while Microsoft’s  largest was Skype at $8.5 billion. Apple, meanwhile, has never done a deal above $1 billion. The deal’s price tag stunned Gartner analyst Brian Blau. “I am not surprised they went after WhatsApp, but the amount is staggering,” he said. Facebook likely prizes WhatsApp for its audience of teenagers and young adults who are increasingly using the service to engage in online conversations outside of Facebook, which has evolved into a more mainstream hangout inhabited by their parents, grandparents and even their bosses at work.

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