Facebook stock dropped. Here’s why it doesn’t really matter.
Last week, on Thursday, July 26, Facebook stock saw an enormous drop of 20%. Predictably, big investors and news outlets alike smelled blood and lunged. With such a large decrease in stock value, several outlets have taken an apocalyptic stance on the future of Facebook. However, this isn’t the first time Facebook stocks have taken a major hit. Just earlier this year in March, after the Cambridge Analytica scandal, the stock plunged 18%. Since then, though, Facebook has seen an impressive resurgence. Prior to Thursday’s drop, the stock had seen an unprecedented rise in 70% overall.
Thursday’s plunge comes as a cumulation of several things weighing on the backs of Facebook execs. For one, increasing discourse around privacy practices has led Facebook to shift its algorithm and design several times in recent months. When big investors sniff a hint of change that may be negatively newsworthy or may affect their payouts, they quickly withdraw. As such, these top-down changes in the way Facebook operates have had an impact on their overall stock value. Likewise, the publicity surrounding Facebook and their accused involvement in the recent manipulation of the presidential election has worked itself to a head. It’s likely that this, too, affected the major plunge in Facebook stock on Thursday.
The big deal (or lack thereof.)
Let’s take a look at Facebook’s major plunge in the past month.
Pretty bad, right?
Not so much when you look at the past year.
Or the past five years.
Some experts argue that this drop was almost inevitable, and certainly necessary for a big giant like Facebook. In fact, even Apple (who just became the first company to reach a value of $1 trillion) had some major adjustment points in their growth cycle. When looking at the overall price point of Facebook as it stands now, this plunge isn’t really that big of a deal. Facebook is not a startup – and thus, they can handle (and likely proactively prepared for) this type of stock drop. Even more, lately Facebook has been – well – absolutely killing it. Over the past year, Facebook beat expectations for earnings per share. Facebook now has 2.5 billion users and consistently meets revenue expectations per quarter.
A likely explanation for the plunge in Facebook stock last week is mob mentality. When change is in the air, some run for the hills. (Plot twist: big investors are no different.) This is especially true when it comes to matters of privacy, ads, and scandal. But to face the cold, hard, truth…
Facebook is here to stay.
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