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Facebook gets sued by Washington D.C.

What's Happening

Facebook continues to face backlash from the 2016 data breach involving Cambridge Analytica, and Washington D.C. has sued the company over its inability to protect user information. FB stock is down 24% year to date.

Technical Analysis

FB was recently trading at $133.4 down $85.22 from its 12-month high and $6.55 above its 12-month low. InvestorsObserver's Stock Score Report gives FB a 61 long-term technical score and a 13 short-term technical score. The stock has recent support above $127 and recent resistance below $145. Of the 32 analysts who cover the stock 23 rate it Strong Buy, 2 rate it Buy, 7 rate it Hold, 0 rate it Sell, and 0 rate it Strong Sell, FB gets a score of 56 from InvestorsObserver's Stock Score Report.

Analyst's Thoughts

Facebook stock ran into trouble in the wake of the Cambridge Analytica data breach during the 2016 presidential campaign, and now the company is being sued by the D.C. attorney general. Facebook has tried to put fears to rest over its ability to handle its user's private information, but the lawsuit brings the scandal back to the forefront. The lawsuit alleges that 852 residents of D.C. had downloaded the app that is associated with the Cambridge scandal, and around 340,000 others may have been affected by the breach. While the maximum penalty of $5,000 per user is not material to Facebook, having the scandal in the news is damaging and will only stoke investor fears over the company's ability to attract and maintain advertisers to its platform. FB stock has struggled in 2018, due in part to the ongoing headlines regarding data privacy, but also a result of slowing member growth and the fact that youth users are turning to alternative social media platforms. FB is trading just above its 52-week low and will try to rebound despite the lawsuit bringing the scandal back into headlines. Analysts have a $194.74 average price target on the stock.

Stock Only Trade

Bullish Trade

If you want a bullish hedged trade on the stock, consider a 2/15/19 105/110 bull-put credit spread for a $0.60 credit. That's a potential 13.6% return (89% annualized*) and the stock would have to fall 18% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an 2/15/19 150/155 bear-call credit spread for a $0.80 credit. That's a potential 19% return (124% annualized*) and the stock would have to rise 13% to cause a problem.

Covered Call Trade

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on InvestorsObserver.com


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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