Facebook Trading Lower After Citi DowngradeBreakout support at 300 should offer a buying opportunity unless another round of political conflict hits the 24-hour news cycle.
Facebook Inc. (FB) is trading near a weekly low on Monday after Citi analyst Jason Bazinet downgraded the social media giant from ‘Buy’ to ‘Neutral’, insisting that Wall Street is “overly bullish on the growth potential of the advertising market”. The stock has sold off more than 1% in the pre-market and is pressing against a trading floor near 315, with a breakdown favoring a critical test of April breakout support at 303.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Politics and Advertising
The company is highly dependent on advertising revenue to meet quarterly revenue guidance, vulnerable to cyclical forces that can impact a broad spectrum of marketing decisions. The stock is trading near an all-time high even though the pandemic is still taking a bite out of ad purchases while stubbornly high unemployment rates and slow vaccine uptake in other parts of the world could defer the much-heralded ‘return to normalcy’ until 2022.
Facebook is also a prime political target due to its massive footprint and engagement in questionable censorship practices. Along with Alphabet Inc. (GOOG) and Twitter Inc. (TWTR), Republicans have accused CEO Zuckerberg and Co. of selective censorship under the broad spectrum of ‘misinformation’. Unfortunately, they’re finding few friends on the other side of the aisle, with Democrats opening investigations on monopolistic behavior.
Wall Street and Technical Outlook
Wall Street continues to ignore the political intrigue, yielding a ‘Buy’ rating based upon 39 ‘Buy’, 4 ‘Overweight’, 6 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $225 to a Street-high $460 while the stock is set to open Monday’s session $70 below the median $395 target. This low placement suggests Main Street is taking the political controversy more seriously than the denizens of lower Manhattan.
Facebook rallied above 2018 resistance near 200 in May 2020 and entered a strong uptrend that topped out at 303.60 in September. The subsequent correction found support at the 200-day moving average in January 2021, yielding a bounce that mounted the 2020 peak in March. It posted an all-time high at 329.82 in April and turned lower once again, dropping about halfway down to breakout support. A test at that level should offer a low risk buying opportunity unless another round of political conflict hits the 24-hour news cycle.
For a look at all of today’s economic events, check out our economic calendar.
Disclosure: the author held no positions in aforementioned securities at the time of publication.