As Facebook suffers its worst sell-off of the year, a ‘reluctant shareholder’ shares her next move
Facebook shares had a rough start to the week.
The social media giant's stock on Monday tumbled nearly 5% in its worst daily loss since November. The decline came after Facebook its worst outage since 2008.
The company came under additional pressure after whistleblower Frances Haugen revealed her identity over the weekend ahead of Senate testimony on Tuesday. Speaking with "60 Minutes," Haugen accused Facebook of "prioritizing their own profits over public safety."
Laffer Tengler Investments chief investment officer Nancy Tengler said Monday there are several reasons investors should be worried.
"I'd characterize myself as a reluctant shareholder," Tengler told CNBC's "Trading Nation." "We've been concerned about governance issues and a management team that seems to be cynical at best, smug and out of touch, and then the regulatory issues."
Facebook has come under scrutiny from lawmakers for hosting misinformation and harmful speech. The Senate Commerce subcommittee on consumer protection on Thursday urged the company to completely scrap plans to offer a version of Instagram geared toward children.
Tengler said regulatory uncertainty pushed her firm to remove Facebook from its 12 best ideas portfolio. The firm also trimmed its Facebook holdings to 3% from 5% in its diversified portfolio.
"We're happy to own it given the valuation – it's super cheap on a relative price-to-sales ratio basis – but I do think you have to be wary," Tengler said. "It's going to sit here for a while. Think about Microsoft when it went through the antitrust lawsuit [in 2001]. This could take some time so I wouldn't jump in here, I'd let it settle."
However, Oppenheimer head of technical analysis Ari Wald said investors might want to buy this dip.
"The stock is down 16% from its prior high," Wald said during the same interview. "It prompts the question – has the trend changed or is this presenting an opportunity? Our take is that the charts indicate an opportunity."
"It has retraced back to its May levels but I think what's most important is that it's still above its breakout above its 2020 high and still above its longer-term trend of higher lows. So looking at past sell-offs that we saw earlier in this year, it does make sense for it to stabilize over about a one- to two-week period," he explained.
After that period, Wald expects the trend to continue higher. He identifies $315 as a level of support and an attractive entry point. Facebook closed Friday at $326.23 a share.
Disclosure: Laffer Tengler Investments holds FB.
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