Facebook vs. the World

You might have noticed Facebook Inc. (NASDAQ: FB) and Instagram were down earlier this week.

Users of both social media platforms reported difficultly logging into their accounts on Wednesday. The outage struck all Facebook’s platforms, including Instagram and WhatsApp, and lasted for some users for nearly 14 hours, CNN reports.

“While outages are a rare occurrence for Facebook, this was the second noteworthy instance in recent months,” Engadget notes. “Back in November, the company had a similar issue that left Facebook, Instagram and WhatsApp inaccessible for some users.”

Facebook’s tech team finally fixed the problem, which the company described as a server configuration change. With Facebook’s servers all patched up, we can all go back to posting pictures of our breakfasts and mindlessly scrolling through our online acquaintances’ endless status updates.

But as our online lives returned to normal, Facebook’s troubles were just getting started.

Just as Facebook cleaned up its outage mess, two key players announced their departure from the company.

“Facebook is losing its product chief Chris Cox, a top-ranking executive who spent more than a decade at the company, just a week after CEO Mark Zuckerberg announced a major new direction for the social network,” the AP reports. “The departure, announced Thursday, follows Zuckerberg’s announcement that Facebook will shift its emphasis to private messaging over public sharing. The change reflects Facebook’s changing audience and continued problems with serving as a conduit for misinformation and vitriol.”

While these key execs break from the Facebook clan, federal investigators are closing in.

A grand jury has subpoenaed records from two unnamed smartphone makers with Facebook partnerships that let the companies see “users’ friends, contact information and other data, sometimes without consent,” The New York Times reports.

It’s been nearly a year since the Cambridge Analytica scandal broke — but has Facebook fixed its problems?

This week’s endless parade of bad press says otherwise. Even Bloomberg is piling on, releasing a cover story questioning Mark Zuckerberg’s dedication to creating a new, caring culture at Facebook:


Facebook shares have taken a couple of small hits as the bad news rolled in this week (the stock is set to open lower by more than 1% this morning).

Taking these new revelations into account, is it time to throw in the towel on this stock?

Not yet.

Investors love negative Facebook headlines. But we’ve yet to see any follow-through to the downside in Facebook shares this year. Despite the endless parade of scandals, Facebook reported record earnings in January, beating analyst expectations and gaining more than 11% to kick off its 2019 comeback run.

The stock has successfully held these gains. Even if shares open near $168 today, the earnings gap remains intact.


Bottom line: Don’t get too caught up in the Facebook drama. The stock is climbing the wall of worry and setting up for additional gains, no matter what the media might reveal next.

While Facebook’s reputation continues to take a beating this week, one rival social media platform is trying to take advantage of the chaos.

Snap Inc. (NYSE:SNAP) shares spent most of 2018 finding new lows. But surprisingly strong earnings prompted some analysts to upgrade the stock last month, triggering a strong rally in this beaten-down name.

The stock continues to soar this week as the deluge of negative Facebook news rolled in. Yesterday, a bearish analyst even upgraded the stock from neutral to buy, triggering a double-digit rally that pushes shares of SNAP to six-month highs.


As I mentioned in February, Snapchat’s daily active users count stabilized during the fourth quarter (that metric alone was enough to help juice shares by more than 20% in a single trading day after the company reported earnings).

Again, I’m not certain that one decent quarter will be enough to permanently fix all SNAP’s problem. Snap will need to innovate — and continue to hang onto its user base — to stay relevant and fend off Facebook attacks. But the stock’s incredible rally is something we just can’t ignore right now.


Greg Guenthner

Seven Figure Publishing
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