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Brand Face-Off: Facebook Inc (FB) vs. LinkedIn Corp

Evaluating FB and LNKD from technical and sentiment viewpoints

by 4/21/2014 11:50:07 AM
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Networking titans Facebook Inc (NASDAQ:FB) and LinkedIn Corp (NYSE:LNKD) have charted different paths over the past 12 months. On the one hand, FB is up more than 130% on a year-over-year basis to rest at $59.82, and has outperformed the broader S&P 500 Index (SPX) during the previous 60 sessions. What's more, the shares are currently riding atop a level of support at their 120-day moving average.

On the other hand, LNKD is a technical laggard, having gained less than 2% in the past year to trade at $175.93. In fact, the stock is down nearly 19% in 2014 alone, and is looking up at two layers of resistance in the form of its 10- and 20-week moving averages. Furthermore, the shares have underperformed the SPX by more than 20 percentage points in the last three months.

Daily Chart of FB since October 2013 With 120-Day Moving Average

Weekly Chart of LNKD since September 2013 With 10- and 20-Week Moving Averages

On the options front, however, LinkedIn has received more bullish attention than Facebook, relatively speaking. For example, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), LNKD's 10-day call/put volume ratio of 1.57 ranks in the 80th percentile of its 52-week range, indicating a stronger-than-usual preference for long calls over puts, from a historical perspective. By contrast, FB's 10-day ISE/CBOE/PHLX put/call ratio of 0.59 -- while call-skewed on an absolute basis -- registers in the 98th annual percentile. In other words, speculators have scooped up long puts, relative to calls, at a near-annual-high rate.

On a similar note, Facebook's Schaeffer's put/call open interest ratio (SOIR) of 0.62 sits higher than 63% of all other readings from the past year, while LinkedIn's SOIR of 0.47 is lower than 98% of comparable readings. This means that short-term traders are more put-focused than usual on FB and more call-focused than usual on LNKD. Consequently, if the stocks maintain their current trajectories on the charts, FB could benefit from contrarian tailwinds (as the bears unwind their positions), while LNKD could get hit by contrarian headwinds (as the bulls unwind theirs).

Outside of the options pits, the Street is optimistic toward both equities. Of the 33 analysts covering Facebook, 30 have doled out "buy" or better ratings. Similarly, 20 out of 31 brokerage firms have given LinkedIn either a "buy" or "strong buy" recommendation. On top of that, the 12-month price targets of FB and LNKD -- $74.06 and $251.81, respectively -- represent considerable premiums to their current share prices. From a contrarian perspective, this leaves LNKD vulnerable to a round of analyst downgrades and/or price-target cuts, which could exacerbate losses.

Based on the above, Facebook Inc (NASDAQ:FB) is the winner of this Brand Face-Off. Not only does the stock appear poised to rally from a mass exodus of option bears, but also, LinkedIn Corp (NYSE:LNKD) could suffer if the high levels of optimism in the options pits (and among the brokerage bunch) begin to wane.

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