HomeEagleFX – Trading Facebook Stocks During Ad Boycott

EagleFX – Trading Facebook Stocks During Ad Boycott

30 June 2020 By Eliman Dambell

Facebook endured a substantial drop in its share prices over the weekend, and July is set to be tougher as major companies withdraw their ad spending on the Social Media giant. 

Since the rise of popular Social Networks like Facebook and Twitter, many companies now consider Social Media as the holy grail of marketing. Social Media advertising budgets have increased in leaps and bounds over the years, with spending on Social Networks in the US alone forecasted to increase by over 20% in 2020. This amounts to more than $43 billion, with social video advertising making up ⅓ of that spending. Naturally, much of that revenue is directed towards Facebook, which generated over $69.7 billion from over 8 million advertisers last year. 

Recently, however, some of the world’s most affluent companies have taken a step back from their Social Media advertising campaigns. Brands such as The North Face and Recreational Equipment, Inc. were among the first to join the #StopHateforProfit movement, a campaign organised by US civil rights groups in protest of Facebook’s failure to combat the proliferation of hate speech and misinformation on its platform. Over 150 companies have joined the campaign at the time of writing, and the list is expected to grow as more brands follow suit.

Stocks Take a Plunge as Boycott Grows

Sparked by the latest wave of police brutality in the US – including the murders of George Floyd and Breonna Taylor – the movement has highlighted Facebook’s communicative power and their failure to put an end to the spread of hate, racism and violence. The platform’s revenue is largely generated through advertising, which is why the movement is asking businesses to take their side by stopping their use of Facebook’s advertising services.

And as the boycott continues to grow, investors have also begun to take notice. As a result, Facebook’s stock (FB) price plummeted by more than 8% on Friday 26th June after news that the household good giant Unilever will be withdrawing all advertising on Facebook, Twitter and Instagram for the rest of the year. As big companies including Starbucks, Coca-Cola and Hershey’s also went public with their decision to halt spending on Facebook advertising, FB stock prices fell by another 3% on Monday 29th June. 

A landslide of traders opening sell positions resulted in FB stock closing at $216.08 on Friday, below the $225 mark that served as the resistance level in January and support level in May and June. This two-day decline was equivalent to a loss of $60 from Facebook’s market value, but as many traders took this as an opportunity to buy shares in FB at a lower price, the charts saw a slight increase as the price crawled back up to $220.64 by Monday’s close. 

What Could This Mean for the Future of Tech Stocks?

If you take a look at Facebook’s past, it’s clear that the Social Media giant is no stranger to controversy. The company has been able to overcome numerous blows to its reputation that have caused its market value to fluctuate. Following the 2018 Cambridge Analytica Scandal, for example, Facebook managed to recover from a 24% drop and regain roughly $134 billion from its market value in less than two months. 

Furthermore, a tough quarter caused by the introduction of GDPR in 2018 resulted in a record one-day drop in share price on July 26 2018, right after Facebook reached its peak market value of $217.50 the day before. Several scandals related to privacy, data and political advertising later, it seems that nothing can bring Facebook to its knees, at least not until a platform as powerful as itself exists. 

The Ad Boycott campaign will come into force on July 1st and, while it is not likely to make a long-term dent in Facebook’s development, the duration of the campaign could force Mark Zuckerberg to implement measures to combat hate speech and misinformation to aid its flattering reputation. 

More news unfolding in the weeks ahead could trigger an increase in market volatility, particularly in technology stocks and related indices. These pivotal events can provide traders with ample opportunities to earn a profit through market fluctuations!

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