Facebook Inc (FB) Stock Is at the Mercy of Trolls

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Facebook stock - Facebook Inc (FB) Stock Is at the Mercy of Trolls

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If you haven’t noticed by now, Facebook Inc (NASDAQ:FB) is one of the most important companies in the world, and has been for some time. Two years ago, social media aggregator Klout ranked Facebook number five among global brands with the “most social influence and engagement.”

Facebook Inc (FB) Stock Is at the Mercy of Trolls

The handful of companies ranked higher included Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), but Facebook stock managed to gain the second most since that list published — 45%. And while there’s still tremendous opportunity for Facebook stock, there’s also tremendous burdens.

Just look at today’s young generation. They’re coming of age in a world in transition, where old paradigms have lost credence, and new ones are eager to take their place. According to a Time op-ed, millennials don’t trust staid institutions like big government or big banks. Certainly, they’ve had little reason to.

Increasingly, the leaders of tomorrow lean on each other for guidance. That’s great news for Facebook stock, which dominates the social media sphere craved by millennials. But does FB have a responsibility beyond the services it provides?

Again, it wouldn’t be too much of a stretch to say that American society is generally leaning toward progressivism. It wasn’t that long ago that people in this country were denied basic rights and dignities due to immutable characteristics.

Today, we are living in a society where the very definition of immutable is often subject to debate. While controversies will always arise, generally speaking, the progressive ideals of fairness and equality are now considered sacrosanct.

Trolls Have Their Way With Facebook Stock

The election of Donald Trump to the White House brought an undeniable surge of right-wing trolls — both of the physical variety as well as the more common online version. Trolling has always been a nuisance in platforms like FB. In some cases, it borders into threats and hate speech. Rarely does it affect Facebook stock, but that might be changing.

The “Trump rally” in the markets following the surprise victory was an unforeseen “consequence” of the election. Many companies have won big. Facebook Inc isn’t one of them. Since the session close on Election Day, Facebook stock is actually down 5%. For context, the Nasdaq Composite where Facebook shares are listed is up 3%.

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Source: Source: JYE Financial, unless otherwise indicated

Obviously, it’s premature to raise a red flag. Still, I have to wonder if FB stock isn’t suffering from an image problem.

Facebook shares currently trade below its 50- and 200-day moving averages. It crossed underneath the former in early November after failing to build off of record-breaking price action. That’s not a problem at all — every healthy bull market has a correction.

Downside volume, however, has been unusually heavy. Furthermore, Facebook stock is trending sideways. FB has actually yet to hit its closing price on Nov. 8!

FB Faces a Tough Moral Situation

I’m not going to say that hate-spewing internet trolls are entirely responsible for the lack of upside movements. Nevertheless, the European Union made a pointed charge at social media platforms like FB for not doing enough to combat internet hate speech. To “incentivize” cooperation, the EU could potentially introduce new laws and regulations.

That could be the unspoken risk factor that might cause serious pain to Facebook stock. There is absolutely an opportunity to introduce algorithms that could seek and censure hate speech. Ugly incidents involving social media are becoming disgustingly the norm. As a secondary concern, they give true political conservatives and liberals a bad name. Branding itself a hate-free platform could provide FB stock a positive lift.

Not being seen as either an accomplice or originator of tawdry behavior is important to companies — just ask Abercrombie & Fitch Co. (NYSE:ANF). But Facebook shares may be walking on a tightrope similar to Target Corporation (NYSE:TGT) when they introduced their transgender restroom policy. As progressive as most people may initially appear, there is a point where you can push an agenda too far.

Then there’s that tricky matter of freedom of speech. Granted, there is a clear line between liberty and libel. But generally speaking, what people would find more offensive than hate speech is the inability to say it.

If Brexit, Donald Trump, and now the resignation of Italian Prime Minister Matteo Renzi isn’t proof enough that most everyone abhors “Big Brother” control mechanisms, I don’t know what is.

For Facebook stock, it would be helpful to aggressively attack illegal activity — threats, harassment, incitement of violence. But beyond that, it’s a slippery slope. Good intentions could go too far, causing unforeseen damage to the FB brand.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


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