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Where now for the Facebook share price as advertisers pull out?

Hundreds of brands are halting advertising on Facebook throughout July as part of a month-long boycott over the social networks handling of hate speech and misinformation. But what impact will it really have on its share price?

Hundreds of brands are halting advertising on Facebook and its subsidiary platform Instagram throughout July as part of a month-long boycott over the social networks handling of hate speech and misinformation.

However, it is unlikely to hurt the company’s bottom line or its stock price too much, with it worth noting that while well-known brands like The North Face, Pfizer and Levi Strauss have all signed up to the planned boycott, many of its biggest advertisers like Walmart, American Express and Home Depot haven’t joined them.

Facebook actually closed higher at $237 per share on Wednesday and is up 4% in pre-market trading on Thursday.

The social media company’s CEO Mark Zuckerberg appeared unfazed by the advertising boycott, telling employees: ‘My guess is that all these advertisers will be back on the platform soon enough,’ according to a report by tech website The Information.

‘We take these matters very seriously and respect the feedback from our partners,’ Facebook spokesperson Tom Channick said in a statement.

‘We're making real progress keeping hate speech off our platform, and we don't benefit from this kind of content. But as we've said, we make policy changes based on principles, not revenue pressures,’ he added.

Analysts still believe Facebook shares will push higher

Facebook saw its first quarter earnings come in marginally below analysts’ expectations, with the social media network recording earnings per share (EPS) of $1.71 compared with the $1.74 forecasted by Wall Street.

Analysts median 12-month target price for the stock sits at $245, with a high estimate of $300. Based on Facebook closing at $237 per share on Wednesday, analysts median target implies a potential upside of 3.4%, while the high estimate suggests the social media giant could rally a further 26.5%.

Facebook continues to trend higher and outperform the broader market amid the Covid-19 pandemic, with the stock up 13% year-to-date, while the Dow Jones Industrial Average index is down 10% over the same period.

Dow Jones consolidates above SMA support

The Dow Jones has been trading above the 200-day simple moving average (SMA) over recent days, with the previous trendline seen in May and June also coming back into play, according to Josh Mahony, senior market analyst at IG.

‘The index is on the rise once again this morning as the market continues to track that confluence of trendline and SMA support,’ he said.

‘With trendline and Fibonacci resistance up ahead, there is a chance we could see another slump before long, with a break through 26,423 ultimately required to bring about a wider bullish theme into play.’

‘Until then, the short-term gains could be capped once more if we see a breakdown below this confluence of SMA and trendline support. For now, the grind higher continues for the Dow,’ Mahony added.

How to trade stocks with IG

Looking to trade Facebook and other UK stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Facebook’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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