Why Facebook Stock Is Down By 4% Today

Facebook Stock Falls Amid Concerns About Whistleblower’s Allegations

Shares of Facebook found themselves under strong pressure after Facebook whistleblower Frances Haugen filed complaints with the SEC, accusing the company of putting profits over the well-being of the public.

Just a few days ago, Facebook was discussed in the U.S. Senate. EU politicians are also calling for an investigation after the recent allegations.

Concerns about Facebook’s role in the spread of hate speech or about its impact on the younger generation are not new, but they have recently gained steam and the pressure on the company is growing.

The stock has reacted accordingly and declined from the $380 level to the $330 level. The general market is also moving lower after the huge multi-month rally, and it looks that market’s bearish mood is a major contributor to the recent weakness of Facebook stock.

What’s Next For Facebook Stock?

Interestingly, earnings estimates for Facebook continued to move higher in recent weeks. Currently, analysts expect that Facebook will report earnings of $14.14 per share in 2021 and $16.09 per share in 2022, so the stock is trading at roughly 20 forward P/E, which looks like a normal valuation level in the current market environment.

However, the market is focused on regulatory risks rather than earnings. If global regulators put enough pressure on Facebook, analysts will have to adjust their forecasts.

The main risk for Facebook is the disruption of the current business model rather than fines from regulators. It is hard to evaluate this risk in a quantitative way, so the market is nervous.

It remains to be seen whether speculative traders will rush to buy Facebook stock after it declined by roughly 15% from the recent highs. The headline risk is significant, and the stock may gain additional downside momentum on any negative news.

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