What happened
Shares of Facebook (NASDAQ: FB) slipped today along with a broader pullback in the market on a weak retail sales report. That was likely the culprit for the social media giant as the performance of its advertising business is closely tied to overall consumer spending. Also today, Facebook said it would take down Taliban or pro-Taliban content, deeming the group a terrorist organization following its takeover of Afghanistan in recent days.
Facebook stock closed the day down 2.2%, while the S&P 500 edged down 0.7% and the Nasdaq lost 0.9%.
Facebook headquarters. Image source: Facebook.
So what
Overall retail sales were worse than expected in July. The Census Bureau reported that total retail sales fell 1.1% from June to July with particular weakness in autos, clothing stores, and e-commerce. The biggest takeaway from the report seems to be that the delta variant of COVID-19 has become at least a modest headwind on reopening, delaying the return to offices and possibly dissuading Americans from other activities like travel.
Meanwhile, other sectors that had surged earlier in the pandemic like autos and e-commerce, two key sources of advertising revenue for Facebook, now seem to be normalizing as the pandemic-related tailwinds that they enjoyed start to fade.
Separately, the company said it was proactively removing pro-Taliban content, though the question of what to ban on the platform and how to do it has been a thorny one in the past. The Washington Post, for instance, reported that Taliban members have used WhatsApp to send out messages to Afghan citizens, and those incidents could be an eyesore for Facebook if they continue.
Now what
Facebook's 2% drop today isn't something that should change any investor's thesis on the stock since such swings are normal, especially given the news about retail sales and the broader market sell-off. The company is also coming off an outstanding earnings report in the second quarter, and is likely to perform well in the third quarter as it laps the period last year that included the Facebook boycott.
That event is a reminder that Facebook faces some political risk, so investors may want to pay attention to how it handles the situation in Afghanistan.
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