Facebook Inc Shares Pulling Back After Reaching New Highs: A Pause That Refreshes?

Facebook Inc (NASDAQ: FB) shares have ranged from $51.85 to $78.36 this year. The latter of those two levels, in fact, was just tested in the last few days.

So, is the current pullback a buying opportunity?

Right now, the bulls have the edge in terms of actual price evidence, as the stock recently set new all-time highs and is still trading above its long-term uptrend line. However, the sharp nature of the decline in the last few sessions has some questioning whether the uptrend line will be able to hold up at support if tested.

What The Bulls See…

The bulls in Facebook love the company's 23 percent plus net profit margins, which translates to over $3 billion in annual levered free cash flow for the company.

Facebook's balance sheet is a thing of beauty, with nearly $14 billion in cash reserves, only $300 million in debt, a current ratio of 12.82 and a debt-to-equity ratio of under 2 percent. Add to all of that the projected growth in sales and EPS of 34.4 percent and 24 percent respectively, and the bulls don't seem to have much to worry about.

Or, do they?

What The Bears See…

The bears, on the other hand, cannot complain about much with Facebook except for the valuation metrics of the company (and perhaps the intangible privacy concerns that never seem to go away but those are largely ignored by investors).

The valuation of Facebook shares is a concern, though.

The company sports a price-to-book of 10.43, a price-to-sales of nearly 20, a market capitalization that trumps enterprise value and a price-to-earnings ratio of 38 (which is on the expensive side of neutral even for a company sporting such lofty growth estimates).

Related Link: Tesla Stock Coming Back To Earth, But For How Long?

The bears also note that a technical break is not far away from current levels.

In this type of situation, with the stock priced for perfection and close to a technical breakdown, any misstep by Facebook operationally -- or even poor market conditions -- could lead to a drop in share price.

Who Will Win Out?

Technicians note that as long as the uptrend line support holds, the bulls have to be given the benefit of the doubt in Facebook.

Traders will be wading into the shares on the long side as the $73 level is tested. The question is whether those purchases will be rewarded with profits, or punished with a quick stop-loss.

Stock chart: