Facebook Stock Loses Momentum After Hitting All-Time High
Facebook is hands-down the world’s largest social media company. The site boasts over 1.7 billion daily users, with another billion or so checking in at least once a month. When you consider the combined accounts of their other three major social media and communications holdings, that brings them to over 3 billion unique individuals in their collective basket.
With all of these – theoretically – satisfied users scrolling away, it may come as a surprise that Facebook’s stock is once again on the downswing.
We’ll explore why through the lens of Q.ai’s artificial intelligence. Our deep learning algorithms trawl financial data for the first sign that a company is worth their stock price. By analyzing various metrics, evaluating past performance, and projecting into the long-term, our AI can offer a prediction of which companies are currently trading Attractive – and which are not.
Let’s see what the data has to say about Facebook.
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Facebook Inc (FB)
Facebook FB ticked down 2.25% on Wednesday, closing out at $249.02 per share on volume over 19.4 million. This is well beneath the stock’s prices throughout the month of September – just take a look at the 10-day price average of $259.61, or the 22-day price average of $274.95.
And yet, Facebook stock is still up 18.7% for the year, signaling that the company is holding strong in an uncertain market. In fact, the company is currently trading with a forward 12-month P/E of 27.91 – despite the fact it’s spent the month of September tumbling ticker-over-tape.
It’s possible that the recent slide in stock prices has provided Facebook with more-than-adequate room to grow compared to its competitors. Whereas the previous overvaluation would have stunted its potential, by sliding back a few percent, the company is set up to take another leap in the next few months.
Facebook’s Story: The 2020 Album
Facebook is a long-embattled company with a history of stock movements based on questionable corporate actions – or lack thereof.
Take the start of 2020, when hundreds of advertisers unliked the company in light of unsavory policies and scandals that once again landed Facebook in the social and political hotseat. Their stock tumbled, Mark Zuckerberg appeared before the senate once more, and it looked like the news would disappear into the continual feed.
Then the pandemic hit, and Facebook’s already-declining stock tumbled a few percent further. The beleaguered social media giant saw the lowest point of the year yet.
And then, the stay-at-home orders were issued. A few states here, a country there, until the globe shut down almost altogether – and Facebook became a meeting hub in the time of smartphones and screen smarts.
This is when Facebook’s stock really took off – and with the company still up $26 over its pre-pandemic 2020 high, they haven’t come close to bottoming out since.
Tech Sell-Off Signals New Beginnings…
However, that doesn’t mean that Facebook hasn’t seen its share of stock market woes since April. In fact, after Facebook reached its all-time high in late August, a massive tech sell-off triggered before Labor Day weekend saw the overvalued stock dip over 10% percent in a matter of days – and it’s been trickling downward ever since.
But this isn’t necessarily cause for alarm.
It’s only natural – and healthy – for overvalued or growing stocks to experience a correction (or more) when the price rises significantly in such a short period of time. So long as the company is doing well financially in other areas, a small swing in the stock market can lead to big things ahead.
And Facebook is doing quite well financially.
Just take the company’s EPS. Whereas many even in the tech sector have slashed per-share earnings across the board, Facebook is up 27.2% in the last fiscal year, with a fantastic 51.7% increase since 2017 bolstering earnings from $5.39 to $643.
Furthermore, despite the financial toll of the pandemic in other sectors, Facebook’s revenue has grown by 6.3% in the last fiscal year – though this is still small potatoes compared to the exponential 84.9% growth of the last three. In that time, the company’s revenue has increased from $40.65 billion to nearly $70.7 billion.
Not to mention, the company’s forward 12-month revenue is expected to grow by 11.1%.
Additionally, Facebook’s operating income leapt by 16.3% in the last fiscal year, making up almost half of the 38% gains seen since 2017, and bringing its operating income from $20.2 billion to nearly $24 billion.
…With Political Scandals Right Around the Corner
However, it may not be time to celebrate yet. Facebook’s stock is still slipping for the third week in a row – and once more, the company may have itself to blame.
Historically, the company is known for its political scandals as much as its services. While individuals spend their time scrolling through status updates, the company is usually fighting for its branded status quo behind the scenes – or closed senate doors.
In fact, from accusations of oversight (or lack of sight) to dodging government watchdogs to refusing to tread on free speech at the expense of real data, Facebook has been mired in controversy for years.
And now, Facebook has rocked the boat once more – in the opposite direction. Whereas the company has often fought for its right to let opinion rule over fact, this week the company’s head of global affairs, Nick Clegg, took a new stance.
According to Mr. Clegg, Facebook has roughly 70 plans of action to invest in (or divest from) one of the most nationally and geopolitically fraught elections in the world: the 2020 presidential vote. The company is prepared to “take exceptional measures to restrict the recirculation of content” on the platform if the November election descends into “extremely chaotic” or “worse still, violent” circumstances.
In other words, for the first time in a significant way within American borders, Facebook has a plan to restrict user speech in favor of the facts.
So, Where Does This Leave Facebook Stock?
Facebook has a potentially tumultuous few months ahead of it, depending on factors both within and outside of the company’s control. While the results of the 2020 presidential election are still anyone’s guess, our AI does have a few answers for you – relating to Facebook’s stock, at least.
After running the numbers and looking at the company’s past performance and future potential, Q.ai’s AI has found that Facebook rates above average from a financial and business standpoint. With a D in Technical and B’s across the board in Growth, Momentum Volatility, and Quality Value on top of descending stock prices, the company proved that it still has plenty of wiggle room to grow in the right circumstances.
And our AI believes that these circumstances are here. Despite the very real challenges the company faces in the socially turbulent times ahead, the mammoth media company is known for making its own weather – and ensuring its own future.
Thus, despite a rough start to the year and a tumultuous few months of decision-making, Facebook has finally pulled out on top with an Attractive rating to finish out September.
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