Facebook shares expected to rise after dip
There’s a lot of back and forth over whether Facebook profits from fake news, but one thing is for certain: the company makes money from advertising. Given its primary source of income relies on advertising, Facebook has been trying to make itself more attractive as an ad platform by focusing on “meaningful interaction” between businesses and their customers.
It’s not hard to advertise on the social media giant’s platform; in fact, Facebook has made it incredibly easy to advertise a product or service and provides a tiered system, that depending on how much you’re willing to spend, will determine how many potential customers you can reach. However, the month of October has proven to be a rather trying time for the company whose internal motto used to be: “Move fast and break things.”
On October the 5th, a former Facebook employee, Frances Haugen, and now whistleblower, testified before the Senate Committee on Commerce, Science, and Transportation about the dangers that Facebook posed to its its users. In addition to the Haugen’s revelations, the tech giant also came under pressure when all its main platforms experienced outages that lasted six hours on the 4th of October. However, despite a series of hurdles, investor confidence in Facebook remains, here’s why…
This isn’t Facebook’s first rodeo
This isn’t the first time that Facebook has come under fire. There was the Cambridge Analytica scandal in early 2018 for which CEO Mark Zuckerberg subsequently appeared before congress, and it was followed in September of that same year by the big reveal that by way of a security breach, 30 million accounts were compromised.
The point is that the tech behemoth over the years has had its fair share of challenges, and each time it’s managed to endure. Facebook’s recent challenges have caused its share price to take a dip. In fact, since its September 1st high of US$384.33, the company’s share price has dropped by 15% and at the time of writing was trading at US$323.77.
However, Facebook’s drop is not exclusive and appears to be part of a group of tech giants who have seen their share prices fall as the result of a series of economic jitters that affected tech stocks the most. Apple, Spotify, Google, Netflix and even Microsoft all saw their share prices decrease.
It sends a relatively clear message: investing in FTSE and S&P 500 companies like the ones just mentioned should be a priority for any investor or trader. The sharp downturn has been attributed to a series of happenings, including concerns over supply chains and what it means for the festive season, the rate of the labour market recovery, and the fact that US lawmakers haven’t yet reached an agreed upon solution on raising the debt limit – a situation that could lead to a financial crises and possible recession.
Why is now a good time to buy?
Facebook’s stock is going to rise again, and when it does, anyone who took advantage of its downturn is likely to profit. Why will it rise? For one thing, the company has said it will implement new safety features to deflect users from harmful content, provide parents with greater control over teen Instagram accounts, and limit political content.
According to JP Morgan, in spite of the dip, Facebook shares are set to rise by 35%, which will place it at a high of US$450. Despite clients complaining about an increase in advertising space on the social media giant’s platform, JP Morgan analyst Doug Anmuth, had the following to say on the matter: “But FB’s ad platform consisting of more than 10M advertisers is extremely resilient & although some marketers may want to shift spend away or reduce bid levels at certain times, we believe there are plenty of others who are eager to capture that inventory.”
In other words, investors have confidence that as Facebook continues to work within the needs of it users, alters its algorithms accordingly, and continues to generate revenue from advertising, it will soon be business as usual.
About the author
Joseph Newport is one of the main content writers at Intelligiants ltd. As an open-minded person he is constantly intrigued by innovation and interesting ideas. He considers himself to be a fast learner and very inquisitive, which appears to be the perfect combination for the ever advancing world of Microsoft.