Shares of Facebook (Facebook Stock Quote, Chart NASDAQ:FB) continued to take a beating in trading on Monday, leading investors wondering when the slide will end.
And although the stock is still relatively cheap compared to the other FAANG members, a continued decline could spell a world of trouble for shareholders, says Jason Mann of EdgeHill Partners.
US markets were down on Monday, led by the tech-heavy NASDAQ which fell 1.4 per cent to 7895.79. Amazon, Apple, Google and Netflix all dropped amid concerns over an escalating trade war between the US and China.
Facebook closed down 1.07 per cent, another poor performance for a stock that has seen its share of troubles this year. First came the Cambridge Analytica data scandal which only served to heighten concerns from governments worldwide over the social and political influence available through social media channels. Worse news for FB came in July as investors reacted strongly to its quarterly earnings report which told of a slowdown in growth for the company.
All said, Facebook’s share price is down almost ten per cent for 2018. And while that slide might look like a buying opportunity to some, chief investment officer for EdgeHill Partners Jason Mann says investors might find better bargains elsewhere.
Facebook stock predictions too bullish?
“It’s certainly gotten cheaper,” Mann told BNN Bloomberg Monday. “Clearly, it hasn’t recovered from its earnings miss. It still has a really good return on equity so they’re highly profitable in that sense, but it has lost its price momentum.”
“Its valuation is okay —we’d put it in the top 40 per cent of all US stocks,” he says. “Relative to other tech stocks, it’s actually a reasonably priced company at 22x earnings, especially being part of the FAANG bucket that has become quite overvalued.”
Google closed down 1.5 per cent on Monday, Apple was down 2.7 per cent, Amazon by 3.2 per cent and Netflix a full 3.9 per cent lower.
“[Facebook has] a weakening price momentum, a valuation that’s still not cheap enough versus other stocks in the market and it has become volatile,” says Mann. “So now for us, it’s neutral. If it keeps declining like this, though, it may end being a short for us.”