The long term prospects for Facebook stock aren’t great.
In addition to the company’s total lack of respect for its users’ data, Facebook’s growth model isn’t going to keep generating big returns.
At the moment, Facebook shares are participating in an epic rally from last December’s lows. The shares aren’t bouncing back to the same degree that the NASDAQ is, which is another cause for concern.
None of this is good for investors that are still holding on to the company.
There are still a number of bullish Facebook stock narratives that are emerging from some of the biggest banks on Wall St., which makes this a unique opportunity.
Dump Facebook Stock
Putting the massive user data issues to one side for the moment, Facebook makes a compelling sell based solely on the fact that it became a vehicle for speculation in the bull market that is currently in its last phases.
Along with companies like Apple, Alphabet, and Netflix, Facebook has been a market darling for nearly a decade. That bull market is the same one that bid Apple up to more than a trillion USD market cap, which seems absurd for a luxury smartphone maker.
Things Can Change Quickly…
Valuations are relative, which is why equity markets can see such wild gyrations. One of the biggest problems that retail investors face is the sell-side nonsense that major banks and brokers push, which usually amounts to ‘buy and hold forever’.
Given the fact that Facebook has to invest huge amounts of money to expand their data storage capabilities, and do whatever they can to shore user confidence, it is fair to speculate that Facebook might not be able to continue to create the kind of return that investors have become accustomed to.
The Data Issues
One would think that after Cambridge Analytica, Facebook would take user data security more seriously.
One would be dead wrong
Of the two massive Facebook user data oversights reported in the last few days, the debacle at Cultura Colective seems more pressing. Cultura Colective is a Mexican media company who was storing 540 million Facebook user records.
The 146GB of data was available to the public. Account names, Facebook Ids, comments and likes were all freely available.
From the initial reports, the data remained online even after Facebook was made aware of the problem. The data seems to have been taken offline after Bloomberg reached out to Facebook, which makes the situation look much worse.
Facebook is a big company that has a long way to fall. Don’t take the plunge with them.