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Executive Face-Offs Won’t Derail Facebook Stock

While FB stock will suffer some turbulence, the company’s new direction is a positive one

By Josh Enomoto, InvestorPlace Contributor

http://bit.ly/2CmKfNH

Although Facebook (NASDAQ:FB) is one of the top performers for this year — shares are up nearly 32% since January’s opener — it frustratingly can’t escape unfavorable PR. Following the announcement of a high-profile executive departure, Facebook stock took a hit in both the regular and extended sessions.

Executive Face-Offs Won’t Derail Facebook Stock
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In a memo to employees that was also shared publicly, CEO Mark Zuckerberg disclosed that Chris Cox, the company’s chief product officer, was parting ways with the social-media firm. A long-time veteran within the executive ranks, Cox was among the company’s first 15 software engineers. To say that he represented the backbone of FB stock is an understatement.

But if that wasn’t enough, another executive, Chris Daniels, is also jumping ship. Prior to this unexpected announcement, Daniels headed WhatsApp, a cross-platform messaging service. Although WhatsApp is popular among small businesses, it has reached heightened resonance overseas. Thus, this departure also levers a significant impact on Facebook stock.

But what caused this sudden shift in executive sentiment? According to The New York Times, brewing conflicts have forced inter-personal rivalries to come to a head.

As you know, FB stock has suffered substantially from a litany of scandals and controversies. These range from Cambridge Analytica to privacy issues to the proliferation of fake news. Naturally, the troubles have invited federal oversight and criminal investigations.

To counter this perfect storm of PR disasters, Zuckerberg deftly transitioned from defense to offense. No longer was he interested in addressing the controversies; instead, he would proactively implement platform changes to prevent future reoccurrence.

That’s all fine and well. However, to accomplish this goal, Zuckerberg placed an emphasis on private conversations between established, trusted parties. Such a strategy may change the face of social media forever, leaving Facebook stock in limbo.

Facebook Stock to Get a Facelift?

It’s important to note that this isn’t just about overprivileged adult-children having a white-collar version of a lunchroom brawl. Okay, it is that, but the executive rivalries underline a possible paradigm-shattering event for FB stock and social media.

Let’s just get the obvious out of the way: At last count, Facebook stock is an investment that wields a monthly subscriber base of 2.3 billion people. With that kind of clout, you can say and do anything without worrying excessively about repercussions.

And just by sheer size, FB can redirect its core industry to its liking. Neither Twitter (NYSE:TWTR) nor Snap (NYSE:SNAP) come close to exercising such power.

During the scandal-ridden 2018, management had one goal: save Facebook stock. Having partially accomplished that, out came the executive claws. Feeling the pressure, Zuckerberg wanted to emphasize privacy over public postings and broadcasts. Integrating Facebook-owned Instagram, WhatsApp and Messenger into a single, cohesive unit was a dramatic step toward this fresh vision.

But Cox, Daniels and other execs broadly disagreed with Zuckerberg’s “unified message” ambition. From their perspective, Zuckerberg’s idea of a “digital living room” — where people enjoy close, intimate and private communication — contrasted completely against the very idea of modern social media.

We live in a world where we get a stream-of-consciousness straight from the President of the United States. I’m not saying that’s good or bad: I have no intention today of diving into that minefield. But what I’m saying is that such insights are possible today because of social media’s open-source nature.

If Zuckerberg gets his wish, these typically private thoughts would return to the private sphere. But how would that distinguish this era from the analog past? More importantly, how will this affect FB stock? So far, the markets presume negatively.

No Need to Panic on FB Stock

Back when Porsche decided to launch an SUV, my friends and I cried bloody murder. How could a revered sports-car manufacturer turn its back on driving purists? At the time, we claimed it was the end of the famous German automaker.

Years later, Porsche has churned out multiple models that my younger self would have described as abominations. Actually, my current self still does decry them as abominations. However, I learned an important business lesson: You have to roll with the times.

A majority of Americans want more control over their internet privacy. That includes a bulk of young people, who of course represent the greatest users of social media. Taking a page from Porsche’s playbook, Zuckerberg simply gives the customers what they want.

But the irony in all this is that Zuckerberg originally intended FB as a modular network. From the beginning, Zuckerberg offered mechanisms by which users can share as much or as little as they want. In other words, Facebook stock is merely returning back to its roots.

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


Article printed from InvestorPlace Media, https://investorplace.com/2019/03/executive-face-offs-wont-derail-facebook-stock/.

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