When it comes to growth-stock investing, the hardest part is separating information from noise. This is exactly what happened recently, suggesting that stocks of Facebook and Tesla are on a downhill. But according to Market Watch, these stories are exaggerated.
A couple of days ago, people on Wall Street have been howling at the two aforementioned companies. For starters, the social media giant reportedly experienced a stock plunge around 43 percent between the months of July and December. The electric vehicle manufacturer, on the other hand, is believed that its stocks plummeted to nearly 19 percent.
Apparently, both companies offered a strong rebuttal to these. It was in a form of a strong fourth-quarter profit, as well as a significant outlook for more substantial growth.
Still, Facebook shares skyrocketed come Thursday last week while Tesla only fell for one percent despite being in a generally rising market. So what does this mean? What do people have to do about it?
One thing is for sure: nothing is going to be certain in markets. After all, investing is all about predicting what could happen in the future. But as far as the headlines are concerned, they are completely false. They just tend to paint both companies as being in a satisfactory position going forward.
Neither is without warts, though. Take for example Tesla. The company saw the departure of its chief financial officer, which is believed to be responsible for the stock drop recently. Regardless, it did not prove to be detrimental for the well-being of the car manufacturer.
This is where the Fidelity fund manager Peter Lynch can offer a strong suggestion. For him, it is always best to use common sense and purchase what people know applies well here.
But among the two companies, the social media giant Facebook is going to be an easier case. In recent years, it is safe to assume that media companies love to exaggerate how well the tech firm is when it comes to utilizing data in order to target ads. But as far as European regulators and/or politicians are concerned, this activity from the company is upsetting.
This is without a doubt the main reason why Facebook had no mass defection despite disclosures of dubious privacy methods and practices. Instead, the firm reported that its average daily user account of took a jump of nine percent from almost a year ago. Even its company-wide revenue experienced a leap, which climbed to around 33 percent to $16.9 billion. To put it simply, its 2.7 billion users are definitely not wrong.
For Mark Mahaney, the Capital Market analyst at RBC, this is certainly the period of sustained re-rating. This is especially the case that the worse of the social media company fears have yet to be realized.
The fact there is no problem with Facebook can be questioned, but there is a reason behind it – and it is pretty simple. For instance, people did not quit from using one of Facebook’s properties Instagram despite the infamous fake stories or news in Russia. Or even if celebrities voiced out there decisions to quit the social media, it did not really affect the company’s user volume. All these, be they good or bad publicity, did not affect the firm greatly. And it surely does not help that no one can give out the exact number of users who decided to leave the platform.
The press is only fond of bringing the idea of someone quitting Facebook, but it cannot justify just how much of an impact it has brought. In fact, a great number of users will still use the platform even if advertisers decide to buy data about them.