Shares in technology giant Facebook (NASDAQ: FB) have experienced a sharp pullback. A little over a month ago, FB shares were changing hands for around $385. Today however, the share price is near $330.
Here, I’m going to look at why Facebook stock has fallen. I’ll also discuss whether the share price dip has created an opportunity for me to buy.
Why has Facebook’s share price fallen?
There are two main reasons for Facebook’s recent share price dip. The first is that we’ve seen a big shift out of ‘Big Tech’ stocks in recent weeks on the back of rising bond yields. Facebook certainly isn’t the only tech stock to experience a pullback. Investors have dumped all the big Nasdaq names, including Apple, Microsoft, and Amazon and moved money into cyclical reopening stocks.
This is frustrating for Big Tech investors like myself. However, I don’t see the pullback as a big issue. Personally, I see it as healthy as these stocks have had a good run.
The second reason is that a former Facebook employee has accused the social media company of prioritising profits over public health and safety. Last weekend, Frances Haugen, who worked as a product manager for Facebook, appeared on CBS’s 60 Minutes and claimed Facebook magnifies hate and misinformation by prioritising profits.
“The thing I saw at Facebook over and over again was there were conflicts of interest between what was good for the public and what was good for Facebook,” said Haugen during the interview. “And Facebook over and over again chose to optimise for its own interests, like making more money,” she added.
Haugen had previously leaked confidential Facebook documents to The Wall Street Journal and US Congress that reflected negatively on the social media company.
Now this is a big issue, in my view. Because there are massive ramifications here if the accusations are found to be true. Not only could advertisers boycott its platform, resulting in a big drop in revenue, but it could see regulators come down hard on the group. Additionally, ESG investors may offload the stock.
Should I buy Facebook stock?
To be honest, this ‘growth over safety’ issue is something that’s bothered me about Facebook for a while. It’s the main reason I’ve never invested in the stock.
To my mind, problems like trolling, fake news, and general toxicity across both Facebook and Instagram are concerns.
It’s worth pointing out that Facebook denies the recent claims and says it’s spent significant sums of money on safety in recent years. And I think there’s an element of truth to this. Research shows that the company is definitely clamping down on hate speech. According to Statista, the number of hate-speech-containing posts removed by the company rose to 31.5m in Q2, from 2.5m in Q2 2018.
I think it still has a long way to go however. So, for now, I’m going to continue to avoid the stock despite the fact the company is generating huge profits. I think there are much better stocks to buy today.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Edward Sheldon owns shares of Amazon, Apple, and Microsoft. The Motley Fool UK owns shares of and has recommended Amazon, Apple, Facebook, and Microsoft. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.