…is what Facebook suffered right after their Q2 earnings release. The Stock price dropped 7% out of the gate on slow user growth. Everyone was waiting for the conference call to start and hoping that a “Roko” tablet would be provided by Mark to stop this Loose Motion. But instead, further bad news was released that Facebook would realize decelerating revenue for the next couple of quarters. That did it. The stock sliding continued all the way to 165, a 25% drop! With this jaw dropping $125B in market cap in less than 2 hours, most Money Managers got smacked right in their face. Actually most of the Wall Street was intoxicated with this FANG beverage and ignored the warnings Mark gave in early NOV 2017 that Security expenses will rise and more work force will be needed to screen the content appropriately. But it is easy to get carried away, especially when one is invested in the spearhead of the FANG names.
Now what? Lets stick to the 3 day rule and wait for the Stock to stabilize. Technically it should rebound below 150 (Cambridge Analyitica lows). Facebook is such a big overbought name that premature Buyers might show up as early as tomorrow but one should avoid the temptation and wait for the Clouds to clear. I would consider selling the 150 PUTs at some point and do not mind owning FB at those levels as some of the verticals like Instagram and WhatsApp are very promising. I was in India recently and found that there is a Gold rush by the Corporates to get on the WhatsApp wagon. Also, the User growth in Instagram is picking up like crazy. This are invaluable assets of Facebook for future source of accelerated revenue.
Bottomline, as we wait for Facebook to recover from the Loose Motion, lets focus on the beaten down sectors like Industrials and Financials where money is bound to flow in from the Tech sector in the short term.
FB: No position