Facebook, Inc. (FB) stock is set to open lower for the second trading day online, Monday, after a wave of industry-leading companies pulled advertising on the social network giant, vowing to boycott through the November election, if CEO Mark Zuckerberg doesn’t want to take proactive measures to silence “hate speech.” If they are fully implemented, the boycott could have a devastating effect on the third and fourth quarter, profits, sending the stock much lower.
Verizon Communications Inc. (VZ), PepsiCo, Inc. (PEP), and coca-Cola (KO) to lead a laundry list of blue-chip companies pledging to support the boycott. Facebook announced that it would “team up” with the right groups and experts in an effort to counter the boycott, but organizers held out, waiting for more concrete action. This makes sense because Zuckerberg has assembled a poor track record on privacy and policy initiatives in the wake of the election of 2016, in which the agents have tried to influence U.S. opinion.
The company currently has books of $ 70 billion in annual advertising sales, with a shift from blue chips and the balance of small firms. These less-known companies may also feel the pressure to follow the boycott, but their participation is unlikely to make the evening news. In addition, small businesses have been seriously injured by the sars coronavirus pandemic, which makes it unlikely their advertising expenditures, the approach of 2019 levels, even if Facebook makes peace with big business.
Wall Street has been quiet as a church mouse since the boycott calls began, hoping that the company to solve problems quickly. A wave of downgrades will be necessary if this does not happen because the analyst consensus of 30 to “Buy” recommendations but no “Hold” or “Sell” calls does not correspond to the actuality. That could be devastating to the current stock price, even if it has already sold more than 35 points last week to all-time high at $245.19.
Facebook Long-Term Chart (2012 – 2020)
The creation of the public company with high expectations and a wide media coverage in May 2012, the opening in the bottom of $40 and trading up to $45 in the first hour of the regular session. Who has scored the highest in the past 17 months, a decline which has hit a low of $17.55 in September. The subsequent rebound, completed a round-trip in the state of the high in September 2013, setting off immediate bypass, which has attracted intense surge of interest from buyers.
The stock’s high above $70 in March 2014 and softened in a rising channel, which gives a historic advance that eventually stalled at $ 219 in July 2018. Facebook and then tripping over his own feet, caught up in privacy scandal that has triggered a 42-point sell of the spread and decline, the break of the rising channel. It fell another 52 points before posting a two-year low in December 2018, while the slight increase in 2019 in the impasse, in July. Buyers returned in October, generating an upward trend, which has made a breakout above the 2018 high in January 2020. The rally failed a month later, the building of new resistance at $224.
Facebook Short-Term Outlook
The vertical decline in March waived nearly 40% of the value of the action, dropping back to $137.10. It bounced back for the month of February, top in May and has flared up again, stalling at above $240 around Memorial Day. June share price has completed a triple top break at this level after the boycott of news hit the headlines last week. The stock is below 50 day exponential moving average (EMA) for the first time since April 21, fixing his eyes on the 200-day EMA, which is perfectly aligned with the psychological $200 level.
Monday’s opening bell to trigger the second failed breakout above the July 2018 high $219, setting off additional sell signals which could reduce some of Facebook’s stock in the$ 200. The price action around this critical level should be informative, with a mea culpa and the action plan possibly induce a boycott of the organizers to step back. However, given the skepticism after Zuckerberg conciliation weekend, reviews, price much lower could easily follow.
The Bottom Line
A fast-growing boycott movement puts Facebook in the sitz bath, just in time for the 2020 presidential election.
Disclosure: At the time of publication, the author held Verizon shares in a family account, but has not held the positions in the other aforementioned securities.