The controversy surrounding data mining firm, Cambridge Analytica has been reflected in Facebook’s stock value. Cambridge Analytica has been accused of stealing personal information through Facebook from approximately 50 million users. The information collected was said to be used to win the 2016 Presidential Election in favour of the Trump Administration, a client of Cambridge Analytics .
They extracted data from millions of Facebook profiles by creating personalized models based on people’s profiles, then promoting Trump through advertisements that would be appealing to users. Cambridge Analytica is now under criminal investigation as their actions are said to be illegal. Facebook allegedly knew about a breach in security and went ahead in suspending Cambridge Analytica from advertising on their platform.
After news broke about the infringement on Friday, Facebook’s stock price declined by 4.5 percent at the end of the trading day. As word spread further, two major new outlets posted details about the connection between the data firm and Facebook, the stock price continued to plummet, falling by 6.8 percent on Monday (the most it has ever declined since 2014) and then opening 5 percent below on Monday.
Due to these reports, Facebook is now being investigated by the Federal Trading Commission and Cambridge Analytica is being investigated by The U.K. Information Commissioner’s Office. As a result of this and information still being made public factors uncertainty and anxiety among current shareholders are on the rise. Facebook’s stock had experienced a decent start to 2018, with shares rising by about 4.9 percent, but the stock has since underperformed the broader Technology Select Sector SPDR ETF.
Based on an analysis of the stock’s charts, signs are showing that Facebook could be headed 10 percent lower, with the potential to fall by as much as 20 percent. Regardless, we encourage investors to hold their shares, and view this fall as a buying opportunity while keeping abreast of the changes in its case with Cambridge Analytica.
We are bullish on tech companies because history has shown that they have the ability to bounce back following adversity. Buying more shares in Facebook now can possibly prove fruitful in the near future.