Should You Still Own Facebook, Inc. (NASDAQ:FB) Stock?

Should You Still Own Facebook, Inc. (NASDAQ:FB) Stock?

Should You Still Own Facebook, Inc. (NASDAQ:FB) Stock?

On July 25, 2018, Facebook (NASDAQ: FB) stock closed at an all-time high of $217.50, representing a gain of more than 450% from its initial public offering (IPO) price. It seemed at the time like the most solid investment out of the whole social media pack.  

Other industry giants like Twitter (NYSE: TWTR) and Snap (NYSE: SNAP) had seen their stock prices fall since their IPOs, reflecting concerns about the viability of their business models. But Facebook sported positive and steadily growing earnings, a high return on equity, and reasonable valuation ratios. What could go wrong?

A lot, actually. As we now know, the 2018 Cambridge Analytica data leak was just the first in a series of scandals, internal power struggles, and regulatory concerns that have caused Facebook stock to plummet over the last year.   

But what’s happening with Facebook, exactly? Why is the stock nose-diving for the second time in the last 12 months? And should investors be worried about the firm’s long-term future?

Let’s take a closer look at this former darling of tech investors…

Leaking Like a Sieve

To tell the full story of Facebook’s recent troubles, we have to start with the data leaks.

The Cambridge Analytica scandal — in which a British political consulting firm acquired and used the personal data of millions of non-consenting Facebook users — is the biggest and most well-known Facebook data leak. But it’s not the only one.

According to a Vice report, several low-level Facebook employees have been fired in recent years for using their access to private user data to stalk their exes.

More recently, a Daily Beast journalist exposed the identity of a man who created doctored video of Nancy Pelosi with help from a Facebook employee who had access to the culprit’s private user data.

These other leaks may be relatively small, but they carry a troubling implication: that Facebook is not doing much to prevent its 35,000+ employees from abusing their access to sensitive information.

All of those leaks got the public thinking about Facebook’s role as a monopolistic custodian (and seller) of our personal data. That, in turn, eventually led to another cause of Facebook stock’s recent plunge…

Antitrust Investigations

There are other social media platforms, but there is no other Facebook. The only other platform with a comparable number of users is Instagram, which is a Facebook subsidiary.

Given Facebook’s dominance and its borderline-Orwellian control over the personal data of billions of people, it’s not hard to see the case for antitrust actions against the company.

Chris Hughes, one of the company’s original co-founders, has said that Facebook should be broken up in order to bring competition and accountability to the social media industry.

The feds are starting to consider the idea, too. Last Monday, lawmakers in the House of Representatives announced that they were looking into possible anticompetitive behavior by Facebook and other major tech firms.

Facebook shares fell more than 7% on the day of the announcement.

Shareholders Revolt

Amid all this turmoil, Facebook shareholders are losing confidence in founder and chairman Mark Zuckerberg.

Last week, at Facebook’s annual shareholder meeting, a whopping 68% of shareholders voted to remove the 35-year-old programmer as chairman and bring in an independent board leader.

Facebook’s dual-class share structure, however, makes it impossible for shareholders to unilaterally fire Zuckerberg. Even though a majority of shareholders want him gone, Zuckerberg controls roughly 60% of the votes due to his ownership of Class B stock, and he was thus able to veto the proposal.

Nonetheless, the vote shows a massive disconnect between Zuckerberg and… pretty much everyone else about how Facebook should be run.    

Should You Still Own Facebook Stock?

Facebook stock is certainly facing a lot of headwinds right now, but it is still a very well-run and reasonably valued company by most metrics. It has a lower price-to-earnings (P/E) ratio than most of its industry peers and a higher return on equity (ROE).

Plus, it’s a bit too late to sell on the news of Facebook’s recent troubles. Shares hit a low of $161.19 at 11:00 a.m. last Tuesday, but they’ve been rebounding since then.

However, given the risks of more leaks, antitrust actions, and shareholder revolts, now might not be the best time to buy more shares of Facebook.  

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 183.91.

The projected lower bound is: 163.09.

The projected closing price is: 173.50.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 23 black candles for a net of 3 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 48.3289. This is not an overbought or oversold reading. The last signal was a buy 2 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 42.77. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 3 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -53. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 22 period(s) ago.

Rex Takasugi – TD Profile

FACEBOOK INC A closed up 5.020 at 173.350. Volume was 7% below average (neutral) and Bollinger Bands were 24% wider than normal.

Open High Low Close Volume___
170.170 173.870 168.840 173.350 16,917,344

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 174.95 181.18 161.27
Volatility: 56 37 42
Volume: 21,148,264 16,887,532 22,010,060

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FACEBOOK INC A is currently 7.5% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of FB.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on FB.O and have had this outlook for the last 14 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

You must be logged in to post comments :  
CONNECT WITH