Investors can’t get rid of Facebook stock quickly enough. Facebook’s stock price went down nearly five percent at closing on Friday with the news that Facebook’s newsfeed would significantly shift in the way that it operates. Most financial analysts take this latest dip in Facebook’s stock as a blip on the radar rather than a dark omen for things to come.
Stock experts are somewhat sanguine about Facebook and see signs of promise for Facebook’s next quarterly earnings report. Other people take a less charitable view of Facebook’s decline and note that people’s collective tendency to dump shares is motivated by a real issue that Facebook may have garnering ad revenue going forward. The belief is that changes in Facebook’s newsfeed could alter the ways in which Facebook facilitates advertisers’ ability to garner impressions and drive engagement.
Many investors who are deciding to park their money elsewhere have done so after looking at Facebook’s ability to drive engagement and ad revenue amidst the changes to the social media giant’s newsfeed. That belief isn’t completely irrational, though the fact that Mark Zuckerberg’s Facebook also owns Instagram could be a buffer against short-term losses at Facebook.
Facebook could also respond more nimbly to changes in its newsfeed that investors choosing to sell have anticipated. The reason that financial opinion is divided on the recent changes at Facebook is that many of those changes have yet to be fully enacted yet, and the long-term ramifications of those changes are even more unknown. Investors simply aren’t fully cognizant yet of how users will respond to recent change and if those customers will continue to rely on Facebook for their daily news fix.
Facebook’s video platform, Watch, could also help buffer a tumultuous quarter for Facebook amid these changes. In conjunction with Facebook’s ability to battle any headwinds with Instagram’s ability to generate additional ad revenue, investors feel that Facebook’s ingenuity could lead to a 20 percent increase in share value over the medium term.
More worryingly, Facebook is the go-to source for ad distribution for a number of media outlets. Facebook could, therefore, pose short-term difficulties for other media outlets looking to quickly expand their bases. Facebook referrals as well as advertising revenues for media outlets relying too heavily on Facebook’s newsfeed could take a hit amid recent changes, but investors think that that downward trend is only temporary. Facebook has weathered heavier storms.