Is it time to give up on FB?

By Jani Ziedins | End of Day Analysis

Jan 14

Free After-Hours Analysis: 

While the S&P 500 keeps carving out fresh all-time highs, FB finds itself falling into a hole and is down nearly 20%. That’s an unusual position for one of this country’s most popular and profitable companies.

This latest leg lower kicked off after the company announced it was suspending Trump’s accounts for violating their terms of service. No doubt investors are expecting a backlash from Trump supporters and no doubt there will be an incremental hit to their revenues. But as far as boycotts go, this one will be fairly mild.

Very few corporate advertisers will join this boycott because they don’t want to get dragged into the dumpster fire taking place in Washington D.C. That means FB’s advertising rates won’t take a meaningful hit.

As far as users go, FB’s target audience is suburban soccer moms who share cupcake recipes. They are unlikely to abandon FB and head over to these unmoderated free speech alternatives. (For anyone not familiar with these venues, they can be very disturbing, even for those with thick skin.)

And once these Trump headlines blow over, there is still the threat of Democrats breaking the company up for being anti-competitive. But you know what? Those storm clouds will pass too. It’s been a long time since the government forced a company to break up and it’s unlikely to happen this time. This is almost certainly more bark than bite. (And chances are Democrats will go easy on the company if they continue their hardline with Trump.)

FB’s near-term pain isn’t over yet, but we should be looking at further weakness as a buying opportunity, not a reason to leave the company for dead.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.