Market Analysts Claim Facebook Stocks Seem Contaminated After Harsh Sell-off
Tacticians from the market have some advice for investors that are looking forward to investing back into Facebook after the unimaginable skid of 8% earlier this week by calling the stocks contaminated.
Boris Schlossberg the managing director of FX strategy and BK asset management said on CNBC’s trading nation on Tuesday that Facebook stocks were undoubtedly contaminated and would face a colossal mass of headwinds as things move forward.
Facebook stocks have plunged ever since a weekend expose revealed that data analysis firm Cambridge Analytica from the UK had harvested the data of millions of its users to help in the presidential campaign of Donald Trump in 2016. The firm had harvested the profile information of 50 million users of Facebook after compromising their accounts. The activities of Cambridge Analytica have raised concerns about how social media giants are handling the privacy of its customers.
The Negative Headlines Are Threatening Facebook’s Business
Facebook is presently confronting scrutiny from the regulatory authorities both in the US and the UK as the lawmakers from these countries have called on the CEO of Facebook, Mark Zuckerberg to justify how a violation of privacy had taken place.
Schlossberg has mentioned that the vulnerability of Facebook originates from more than just administrative demand. He went on to say that the negative headlines were also threatening its primary business. The growth of Facebook has stunted among the millennial’s who are likely to consider this story as noxious for the brand.
Concerns about the shifting demographics have been raised by Facebook contrarians for several years. Younger users of this platform have chosen fresh alternatives such as Snapchat and Instagram which is also owned by Facebook. The company is expected to witness a decline of 5.6% to 9.3% in users below the age of 25 in 2018 alone according to eMarketer.
Strategists Talking about the Risks And Suggesting Caution
During the interview, Schlossberg even as he advised caution for investors also mentioned that Facebook was also Instagram and WhatsApp and therefore it would eventually move forward to converting to amazingly good value. As the risks are presently unknown he, however, said he would certainly stay away from the stocks.
Ahead of the fundamentals, the tale of technicals hints that Facebook might be slated for a rebound even though it may be short-lived as stated by the investment tactician at MillerTabak, Matt Maley. The volume of Facebook stocks had spiked over the last two days indicating to Maley that overselling may have taken place. Share prices of Facebook were higher by 1.3% on Wednesday.
Maley finds it concerning to disregard the torrent of negative publicity which seems to be pummeling the company. He says that it may be beneficial to sell on any bounce rather than purchasing on weakness
There appear to be plenty of headwinds out in the market along with uncertainty mentioned Maley even as he added that people may not want to dump the stocks at this stage. They could be looking for some bounce which may not be long-lasting.Shares of Facebook are currently on track to close the week with losses of approximately 10% which will be its worst week in four years. The shares after falling are in for a correction after dipping 14% from its all-time high in intraday trading which it had set at the start of February.
Even as we speak about the comments made by market analysts it must also be mentioned that tech stocks are presently at their highest for nearly a decade even after a harsh week which saw billions being wiped out from the sector. Traders are confident that investing in tech stocks will definitely prove valuable despite the recent weakness. These stocks are expected to outperform the market in the United States.
Investors that are worried about the rocky two days must understand that it could also stretch in two weeks and therefore employ some strategies to play out any weakness. Having some of the protections in place will give investors an opportunity to protect themselves in the event of a downside.
The drastic fall witnessed by Facebook was just a result of the regulatory scrutiny which it had brought upon itself after being embroiled in a scandal with Cambridge Analytica which harvested user information of the company for use during the presidential campaign in 2016 for president Donald Trump. Therefore the slump seen is just a temporary phenomenon because tech stocks have rebounded to be at their highest since the tumultuous weekend.
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