Why Facebook May Have Reached a Bottom

NEW YORK ( TheStreet) - As hard as it may be to believe, I have always wanted to like Facebook ( FB).

However, as a value investor, finding the right opportunity to "like" Facebook has always come as a great challenge.

Recently, upon its somewhat disappointing earnings results, I've tried to make it a value play by offering this argument: Should its stock continue to drop, it might soon become an acquisition target of Apple ( AAPL), especially considering the two companies are already great friends.

What's more, there's the possibility that Facebook might acquire Research in Motion ( RIMM). Its business and sustainability is now heavily predicated on its ability to perfect mobile ad revenue. Facebook would instantaneously become a hardware and services company, putting to rest all of its critics who doubt the value of social media.

However, this time I think there are more compelling reasons to consider the stock -- none more important than the fact that it just might have reached bottom. This is despite others stating that "bottom-revealing" scenarios have yet to play out. For that matter, calling it a "near-term bottom" is not entirely out of the question.

After all, its fundamentals have yet to change. But who says that changing fundamentals is a requirement for a potentially great trade?

When Facebook reached its 52-week low last Thursday at $19.82, the stock had bounced as high as 13%. What's more, it closed that day at $20.04. While not an entirely revealing platform, what it shows is there is strong support at $20.

If you recall, the stock reacted precisely the same when, upon its drop from its $38 initial public offering price, it bounced near the $25 mark to then reemerge above $30. Am I suggesting this is what is going to happen this time? Not entirely. But the patterns are pretty telling.

As Facebook continues to be an anomaly, it would not be surprising to see the stock approach $26 over the next couple of weeks.

For that matter, it is worth noting the company has just received an upgrade by Bernstein from sell to hold with a price target of $23, representing a P/E of 64-times next year's earnings and a premium of 15% from current levels.

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