One Factor Driving Facebook (FB) to an All-Time High Today (Update)

Update (4:05 p.m.): Updated with Wednesday market close information.

NEW YORK (TheStreet) -- Facebook  (FB) rose to an all-time high of $71.97 on Wednesday after the company announced its new regulations for postings about gun sales in order to limit criminal activity.

The social networking site has instituted new rules to monitor and restrict such postings. Facebook users can still post information and offers about guns for sale, but the site will now remove all posts that do not include a background check. Facebook will block users younger than 18 from reading posts from unlicensed dealers. All members will also be able to flag suspicious posts if they suspect criminal activity.

Moms Demand Action, an advocacy group formed in the wake of the shooting at Sandy Hook Elementary School, started to pressure Facebook last year to adopt tighter restrictions to prevent illegal gun sales.

The stock closed at $71.57, up 4.03% or $2.77 from its previous close of $68.80.

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TheStreet Ratings team rates FACEBOOK INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FB's very impressive revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues leaped by 63.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although FB's debt-to-equity ratio of 0.03 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 11.46, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 566.66% and other important driving factors, this stock has surged by 156.56% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Internet Software & Services industry and the overall market, FACEBOOK INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: FB Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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