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Facebook Left Out of Big Tech Rebound in 4th Week of Losses

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(Bloomberg) -- A rebound in megacap technology stocks that helped snap four weeks of declines for the Nasdaq 100 Stock Index had one notable exception this week: Facebook Inc.

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A 0.3% gain for the social media giant on Friday wasn’t enough to reverse losses the stock suffered earlier in the week amid intense scrutiny of its products and a global outage. Facebook shares ended the week down nearly 4%, marking the fourth-straight week of declines, the longest such stretch since the height of the Covid-19 crisis in March 2020.

The shares were down 14% from a September peak, the worst showing among the biggest U.S. technology companies. The weakness stood in contrast to gains for other big technology companies such as Microsoft corp. and Alphabet Inc., which both advanced about 2% this week.

Recent losses reflect a rise in Treasury yields, which have broadly weighed on growth stocks, along with a number of company-specific headwinds. This week saw a lengthy global outage of the company’s sites, along with Senate testimony from a former insider turned whistle-blower, who argued that Facebook puts profits ahead of user safety.

Despite these issues, the stock’s decline has some sensing a bargain. Facebook’s price-to-earnings ratio is 24.4, below the 26.3 ratio for the S&P 500 Index. The stock is also trading at a discount to its average historical multiple, according to data compiled by Bloomberg. On Thursday, JPMorgan wrote that the stock looks undervalued and that it is buying the pullback.

Should the stock work its way back to record levels, that would be in line with historical precedent, which has seen Facebook recover through a number of high-profile crises.

Truist Securities analyst Youssef Squali echoed this view on Friday, writing that “this time does feel different, but the outcome ultimately is most likely the same - Facebook should still be a winner.” The firm reiterated a buy rating on the stock.

(Updates shares with closing prices throughout.)

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