Why Facebook, Inc. has slipped today – The Motley Fool

What happened

Actions of Facebook, Inc. (NASDAQ: FB) were slipping today on a continuous series of bad press and in the middle of a wider sale in the Nasdaq, who lost 3% on the day. Facebook closed the session today down 5.7%, affecting a minimum of 52 weeks.

So what

The concern over the role of Facebook in society in general, which had been mentioned earlier by Russian piracy in the 2016 elections and the Cambridge Analytica scandal, among other issues, was again raised when an investigation report from The New York Times last Thursday, detailing the hiring by Facebook of an opposition company that sought to link anti-Facebook activists to liberal financier George Soros, while describing other anti-Semitic critics, among other topics showing a company in disarray and a questionable ethics.

There is not much to like for Facebook these days. Source of the image: Facebook.

The report especially illustrated the company and its leaders as a group of astute operators, disconnected from the surf of the reaction that overwhelmed and the growing opinion that many see it as a force in society for evil rather than for good.

Following this report, CEO Mark Zuckerberg organized a videoconference with all companies to vigorously defend the company and deny having sought to cover up any wrongdoing, as reported in the report.

Over the weekend, tensions against Facebook continued to rage the Wall Street newspaper An article appeared saying that Zuckerberg considered his company as "at war".

Now what

It has become clear that at the very least, Facebook will have to dramatically increase its spending on content monitoring and other defense needs, in order to protect the company from potential hackers and hackers. avoid being hijacked as a platform for hate speech, such as what happened with the genocide of Rohingya Muslims in Myanmar. The company has already spoken a lot to investors, predicting a narrower operating margin in the coming quarters; However, the biggest risk for Facebook is that users and advertisers are so disgusted with the platform that they simply disconnect. For now, we do not know how serious this threat is, because information like the above is often sensationalistic by media elites but ignored by the masses. In recent quarters, the growth in Facebook users in North America and Europe has essentially bottomed out.

A measurable user outflow would likely plunge the stock, which would indicate that the Facebook brand has been irrevocably damaged and that these users will not return. On the other hand, if Facebook can survive the current challenges, the title looks exceptionally cheap with a P / E of 19. After all, according to conventional financial measures such as revenue growth and profitability, this looks like still a blockbuster affair.

Jeremy Bowman owns shares of Facebook. The Motley Fool owns shares and recommends Facebook. The Motley Fool recommends the New York Times. Motley Fool has a disclosure policy.