Here's Why Some Are Saying Facebook's Stock Has BottomedBy and
Facebook Inc. said it will take years to resolve its security woes. But for investors, recent analyst commentary and market indicators suggest the worst may already be over.
Deutsche Bank is “cautiously optimistic the bottom is in,” analyst Lloyd Walmsley wrote in a note to clients. “A year from now, if not sooner, this episode will have been a uniquely compelling buying opportunity in the mega cap Internet space.”
Although Facebook shares are still down 14 percent since the Cambridge Analytica data breach was revealed last month, the options market is telling us that initial panic selling has subsided. Short-term volatility, a measure of uncertainty in the stock’s value over 10 days, has fallen 10 percent from its peak on March 29.
Meanwhile, technical analysis suggests that the bottom was put in on March 26, when Facebook staged a vicious intraday reversal on massive volume. The stock has found support at $150 a share, testing that level five times in seven days. Rich Ross, a technical analyst with Evercore ISI, said Monday that the “bullish weekly reversal on critical support makes the stock a strong buy” with a floor at $149.
The shares rose as much as 4.2 percent today after Facebook Chief Executive Officer Mark Zuckerberg assured investors that he sees no meaningful impact from the scandal and its aftermath. The company’s privacy changes and improved visibility are encouraging and will help the company move past the recent controversies, Bank of America analyst Justin Post said in a note where he reiterated his buy rating on the stock.
Investor sentiment will be tested again next week, when Zuckerberg testifies at U.S. Senate and House committee hearings. Facebook has also indicated a willingness to meet with high-level European Union officials.
— With assistance by Courtney Dentch