For five years, buying the dip in Facebook Inc. as its value soared by half a trillion U.S. dollars has been one of the stock market’s surest bets. Right now, it isn’t working.
An investor who purchased Facebook shares after its historic 19-per-cent plunge on July 26 is still in the red almost a month later. That’s in contrast with the relatively quick turnaround in the stock at the depths of the company’s data-privacy scandal in March.
Few stocks have been more consistent money makers than Mark Zuckerberg’s social-media behemoth, whose only down year was in 2012, the same one in which it went public. Bulls are proving slower to forgive this time around, leaving the stock behind even as they bid up other tech titans including Apple Inc. and Amazon.com Inc.
“Instead of just the cloud of Cambridge Analytica and the related chatter around data privacy and security, there seems to be multiple issues at play now,” said Piper Jaffray analyst Michael Olson, who is bullish on the stock. They include forecasts for lower operating margins, concern about revenue generation in its new Stories product and European privacy laws, Mr. Olson said.
Facebook’s shares have gained less than 1 per cent since closing at a three-month low on July 30, two trading days after the company’s warning that revenue growth would continue to slow in the second half of the year triggered a rout that wiped out a record US$119-billion in market value. The stock recouped half of its data-privacy losses over 15 trading days in the spring and rose above the pre-Cambridge Analytica stock price in less than two months.
A spokeswoman for the Menlo Park, Calif.-based company, Nora Chan, declined to comment on the stock’s recent performance.
Apple has set fresh records six times after surpassing US$1-trillion in market valuation on Aug. 2. Amazon, with a market capitalization of about US$927-billion, isn’t far behind.
The bright side? According to Mr. Olson, it probably won’t get much worse.
“While there are multiple issues on investors’ minds, unless there is some additional negative catalyst, most of those issues are fully baked into the stock,” he said.