What happened?

On Friday, the massacre of 49 people in New Zealand was streamed live on Facebook. This spiked concerns about the company’s ability to monitor disturbing content and added to the problems Facebook had experienced earlier.

The bad news started to pile over Facebook about a week ago. US senator and presidential candidate Elizabeth Warren proposed on March 8 to break up the company. Then the social network experienced a partial outage that lasted more than 14 hours and affected nearly 2 billion people. Next, two key executives departed from Facebook due to the disagreement about its further strategy. Federal prosecutors are investigating the data deals Facebook arranged with tech companies like Apple, Microsoft, and Sony. The investigation is about user privacy violations. Finally, the Cambridge Analytica scandal isn’t over either. It seems like the entire world is against Facebook.

Why is it important?

In general

The key issues and challenges Facebook is facing are closely related to the specific nature of the services it provides. Which other company has to deal with extensive amounts of fake news and the necessity to monitor user content on a truly mind-boggling scale?

CEO Mark Zuckerberg has promised to work harder to avoid situations when the social network is used to spread extremist videos and messages. However, there are serious doubts that it’s possible to monitor the content of 2.7 billion users in a timely and efficient way.

For investors

As people of power and high social status question the ethics of the company’s business as well as its ability to protect users from hatred, disinformation, and violence, it’s hard to envisage Facebook stock on the path of effortless appreciation. Zuckerberg has recently announced that the company’s focus will shift to private, ephemeral and encrypted communication. Although it may help to rein in the content issues, such an approach will obviously hurt the company’s advertising revenue. All in all, the presence of the conundrum about the company’s future and the uncertainty which is related to it, makes us think that Facebook isn’t attractive for a buy-and-hold strategy, at least for now.

For traders

The sentiment toward Facebook, as judged by tweets on Twitter, is at its most negative in almost 8 months. The stock has retraced up 50% of its 2018 decline, and technically this area can provide strong resistance. The selloff started in July when the company’s revenue missed forecasts and user growth slowed down. The current newsflow is negative as it’s described above. On the weekly chart, there’s a “dark cloud cover” candlestick pattern. The decline below $165.00 will open the way down to $160.00 and then to $153.00. Resistance is in the $172.40 area.

Facebook Inc, weekly chart