Facebook (NASDAQ:FB) stock draws a lot of controversy too often for the opportunity it presents to investors.
So far, every major dip from “scary” headlines was an opportunity to get long FB stock.
There is one unfolding now, and my thesis is that this too shall pass. The outcome from this latest topic will be better than what skeptics expect. There are naysayers too often, in spite that they have been wrong every time. The disconnect could be as simple as looking at FB’s problems from the American lens (more on this later).
Even though the company is from here, our issues are not necessarily global. The premise that caused the dot-com bubble was the chase of the eyeballs. Having a website back then was the opportunity that the internet provided.
Now it is the era of the social-media platforms. But this time they have actual metrics and business models for proof of concept. Therefore, the dot-com bubble morphed into a proven system for profits. Facebook could serve as the poster child for this opportunity.
Facebook Is Not American
The disconnect for most experts is that they forget that the U.S. users are a tiny fraction of Favebook. This social media behemoth’s successes come from the global eyeballs that are on its platforms. Therefore, what may seem important as a prevailing meme in America, may not even register elsewhere.
Case in point the Cambridge Analytica headline disaster. After extreme hate and headline violence, it turned out to be a blip. The stock rallied 230% and broke records.
Meanwhile, the experts in the media caused a panic sell in the stock. They prognosticated that the advertisers would flock away from it. Some tried but they all came back. Because in the end, the global eyeballs are still on Facebook platforms. The company has billions of users and they are not leaving.
Furthermore, these users have practical reasons for sticking with Facebook. It is not likely easy to move billions of pictures and videos off it. My friends who are heavy users are in too deep to switch. Facebook also offers an extremely convenient way for international families to stay in touch. Anyone over 40 is not likely to eagerly ditch a platform for a new one. So, new alternative platforms are a theoretical threat but not with big teeth.
FB Stock Is In Strong Enough Hands
It would take major mistakes from management to break its momentum. So far, the team has proven itself worthy of the benefit of the doubt on Wall Street. They are not foolproof, as we’ve often seen when they face angry politicians. But overall they have navigated the treacherous waters well enough.
After the 2020 summer rally, FB stock drifted 18% lower into January. I wrote about buying the dip and that trade offered a 50% rally. Giving back some now of that upside is not bearish. Stocks often revisit the necklines from breakouts, especially after setting records.
This is where smart money takes advantage of the negative FOMO sellers. When there is headline panic in a stock, there’s often an opportunity lying in wait. When the proverbial house is on fire, the brave run in to look for treasures.
The latest whistleblower headlines have caused extreme panic in a quality stock. My bet that the outcome will be new highs into 2022.
Netflix (NASDAQ:NFLX) could provide a short-term catalyst. It reports earnings this week and it is the “N” in the FANG gang. Facebook stock is the letter “F” of this giga-cap stock posse. They tend to rally together in both directions. Going into last week, sentiment was sour enough on Wall Street that it could have reset expectations.
The odds of too much exuberance this earnings season is likely lower than last.
Earnings Are Proof Positive
I am very confident that all mega-tech companies will report outstanding numbers. Usually the disappointment in the price action comes from bad expectations, not bad performances. I would confidently hold shares or add on these dips. There is support for FB stock going into $300 per share. If that fails, there are even stronger buyers within $25 below that.
In the long term, if the stock markets are higher, then Facebook stock is leading it. To short the potential of 3 billion monthly active users for a thesis is ridiculous.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.
