Facebook stock plunged 9% over the course of 3 trading days in the wake of Cambridge Analytica’s access to 50 million Facebook users. The aftermath feels like a fork in the road for the once darling social network. The bear camp now includes Jim Cramer, who sold on the plunge, disappointed with Facebook’s handling of the whole situation.
Adding to the bearish sentiment felt by many was a report that in the two weeks prior, Mark Zuckerberg himself sold off 1.14 million shares — more than any insider. Remaining bulls hold on to the strong YoY growth as well as the huge opportunity in digital advertising, as well as yet to be exploited WhatsApp and fast growing, Snapchat choking Instagram.
On paper, it makes perfect sense to buy on the dip, but this time feels different — not only are we entering a period of rising interest rates but more significantly because consumers may finally lash out at some of the companies exploiting their private information. The market seemed to anticipate this when Twitter and Snapchat also plunged on Facebook’s news. The specter of Congressional hearings and the growing realization that we may be approaching a cultural tipping point means that we agree with the bears — now is not the time to touch $FB. Instead, picture outraged Senators, more salacious news about how this data was exploited and investigations on how your data is in fact, not very well guarded.
Target Price: $145 (as of this writing, -14% further to fall)