Displaying items by tag: facebook

(San Francisco)

Last week’s nosedive in Facebook shares was nothing short of historic. Twitter followed close on its heels. The big question for investors is whether these flops signal anything about the greater market, or were they just idiosyncratic falls? The answer is that they may. Stocks are very concentrated at the moment, with a small group of tech stocks—the FAANGS—driving the gains. Therefore, losses in that group could drive down the whole market, and even be seen as a bellwether. Today’s concentration is roughly on par with 1999, but differently, all the leaders are in the same sector—tech, making the market more vulnerable. Because tech companies are also the engine for growth, their predicted expansions make up an even larger share of forecasted earnings growth than their current market capitalization.

FINSUM: We see the point of this argument, but we do want to point out one important caveat: the word “tech” itself. We use that term very liberally today. While it is easy to say the concentration is dangerous because all the constituents are “tech”, Amazon, Apple, Facebook, and Netflix are all very different businesses, so perhaps not as intercorrelated as “tech” would indicate.

(San Francisco)

Yesterday was an absolutely monstrous one to be an investor in Facebook. In what will likely go down as a history-making day for the company, Facebook shares dropped a whopping 20% yesterday, equating to more than $100 bn of value lost. The huge losses were sparked by weaker than expected revenue growth as well as flat or falling user bases. That sent the stock down 7%. However, it was the guidance provided on a conference call that really spelled doom. The company’s CFO said that he expected weak revenue growth to continue, while costs were expected to rise 50-60% this year.

FINSUM: The big rise in costs is coming because Facebook is hiring 20,000 staff to increase cybersecurity. The need to do so does not bode well for the stock or the tech sector generally.

(Washington)

The bad news just keeps on coming for the tech industry. Already this morning there is a lot of negative press about Google allowing third party developers to actually read users’ Gmail accounts, and now comes the news that the SEC has opened an investigation into Facebook for its data breaches. The SEC is looking at Facebook’s disclosures of the breach, and in particular, Mark Zuckerberg’s congressional testimony. Facebook says it is fully complying with all the current investigations it is facing.

FINSUM: This development might be particularly troublesome for the stock because investors are most familiar with the SEC. Hard to see what might develop here.

(San Francisco)

In what is a very odd and counterintuitive change, in just a matter of weeks, both Facebook and Google will be removed from the S&P 500’s “tech” sector. Indexes are changing up their alignments, and Google and Facebook, along with Netflix and Comcast, will all now move to a new group called “communications-services”. The changes are due to take place on September 28th and will force investors to trade in and out of billions of Dollars of holdings to realign their portfolios.

FINSUM: What this means is that the “tech” sector, and in factor no sector, will now be such a dominant component of the S&P 500. It may also reshape trading patterns, and according to some, boost volatility.

(San Francisco)

Investors in Facebook, and possibly tech more broadly, need to be worried. New news has broke which says that Facebook has been sharing its data with China. The company has been sharing data with device makers like Huawei, among others. The news comes just at a time when fury over Facebook’s data policies have caused a global uproar among the public. According to the Financial Times, “Facebook shared user data including information on religious and political leanings with the device makers, and personal data collected from users who had asked for it not to be shared with third parties”.

FINSUM: We don’t know if there are legal ramifications for this, but it will certainly only add weight to the current push to subject the tech industry to greater regulation.