The Facebook (NASDAQ: FB) stock crashed to the lowest level since June as investors reacted to the new allegations against the company. The stock is trading at $328, which is about 14% below the highest level this year. Its total market capitalization has fallen to more than $928 billion.
Facebook whistleblower allegations
Facebook has been in the spotlight in the past few weeks. During this time, the Wall Street Journal has published a bunch of allegations based on internal documents from the company.
The firm’s management were also forced to testify before the Senate last week. These testimonies will continue this week, with the whistleblower testifying tomorrow.
The Facebook stock price has also declined after the company downgraded its forward forecast because of the latest iOS upgrade.
Therefore, the question is whether these new allegations will have a major impact on the company. In an interview today, Jim Cramer of CNBC said that these allegations could drag the FB stock price.
I disagree. For one, we need to understand how Facebook makes money. The company operates some of the most used online platforms in the world like Facebook, Instagram, and Whatsapp. It then makes money by letting companies, often small businesses, advertising on its platforms.
They advertise on these platforms because they work. I have seen people launch a business today and start seeing orders the following day because of these adverts.
Therefore, in my view, I suspect that the new crisis will not have an impact on Facebook’s business. In this, I don’t expect that a critical number of users will deactivate their Facebook accounts. Also, I don’t think that advertisers will give up on the company.
Another reason to be optimistic about the Facebook stock price is that we have been here before. As you recall, the stock crashed during the Cambridge Analytica scandal. It also declined slightly when a bunch of the biggest advertisers pulled back their ad budget.
Facebook stock price analysis
The daily chart shows that the FB stock price has been under intense pressure recently. The stock has moved into a correction zone and is currently below the 38.2% Fibonacci retracement levels. The 25-day and 50-day moving average, which is a bearish signal.
Therefore, I suspect that the FB stock price will continue dropping in the near term. It will likely hit the 50% retracement at $313. However, I believe that long-term investors will benefit by remaining bullish about the company.
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