Long-form social media platform Facebook (NASDAQ:FB) is an entrenched part of American culture. This is reflected in the long-term price trajectory of Facebook stock, which has enriched patient investors year after year (with a few exceptions).
But while the Facebook stock price has marched steadily upwards, the company’s reputation has suffered during the past few years. Facebook’s legitimacy as a socially mindful company has been called into question.
And, tt even got to the point where CEO Mark Zuckerberg was called to testify in front of the U.S. Congress to answer questions about user data privacy concerns. Admittedly, Zuckerberg did a fairly decent job of answering those questions on Capitol Hill.
Still, it’s understandable if doubts linger for some Facebook stock holders. And now in 2020, the nation is embroiled in a highly contentious election year. Will Zuckerberg and Facebook use this as an opportunity to enhance its public image?
A Closer Look at Facebook Stock
Over the years, Facebook stock has been a dip buyer’s dream. Each and every pullback in the share price has been bid up. This is why I don’t recommend attempting to short-sell the stock for more than a day or two.
One of the more prominent price pullbacks occurred during the novel coronavirus crisis. This situation created a prime dip-buying opportunity for Facebook stock bulls.
In March, Facebook stock touched its 52-week low of $137.10. What followed was a price surge of epic proportions. By August, Facebook shares reached their 52-week high price of $304.67.
A moderate price drawdown ensued in September, but that’s not necessarily a bad thing. This event allowed the trailing 12-month price-to-earnings ratio of Facebook stock to pull back to 31.79. That’s not ultra-low, but it’s not outrageously high, either.
Combating Electoral Misinformation
At this time, Facebook is still struggling with the reputational fallout from that scandal. Sure, Facebook has millions of users, but not everyone feels great about the company.
Trust is of paramount importance for social media platforms. In order to regain its legitimacy in the minds of its user base, Facebook must be proactive in its commitment to truth and honesty.
In this vein, one thing that Facebook’s doing is taking measures to reduce misinformation connected to the 2020 U.S. election. For instance, the company has banned misleading manipulated media. These would include misleadingly edited images, sometimes known as “deep fakes.”
Steps in the Right Direction
This is a large-scale effort in which Facebook is collaborating with 50 global experts to fact-check postings and detecting these deep fakes. Additionally, Facebook has a new policy in which the company will ban certain edited/synthesized videos that are difficult to identify as fake.
Along with those measures, Facebook will remove videos that contain hate speech, graphic violence and/or elements of voter suppression when they violate Facebook’s community standards.
Damage Control Efforts
Plus, Facebook is taking action to combat the allegedly unauthorized harvesting of its user data. To that end, Facebook has filed a lawsuit in the Superior Court of California, County of San Mateo against two companies that are accused of scraping data from Facebook and from its Instagram social media platform.
Also, these actions won’t completely erase the bad taste from the skeptics’ mouths. Facebook still has a long way to go in regard to its reputation damage control efforts. Shareholders should be encouraged to see Facebook taking essential steps in the right direction this year.
The Bottom Line
Facebook’s reputation is fully healed by any means. However, the company is taking action and that’s commendable. And for Facebook stock investors, it’s a sign that they can keep on buying those share-price dips.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.