Facebook's Shrinking Margins Top List of Stock's Recent Woes

Facebook has contended with many issues in 2018, yet their shrinking margins are giving investors the most pause, according to Bloomberg.

As the internet giant’s shares continue to languish in the aftermath of its $121 billion one-day rout in July, Facebook will need to show that it can jump-start earnings growth to restore faith with investors who have been reluctant to buy, analysts and shareholders say. Shares of the Menlo Park, California-based company have continued to slide after the historic selloff, which was triggered by forecasts for narrower operating margins and slowing revenue growth.

Criticism of its content policies from U.S. President Donald Trump and the prospect of government regulation haven’t helped, nor have indications that some users are reducing time spent on Facebook. This week, U.S. lawmakers on the Senate Intelligence Committee discussed the regulation of social-media companies during testimony from Facebook COO Sheryl Sandberg.

While shares of Faang-group counterparts Apple and Amazon have been setting records, Facebook is the only member that has lost ground in 2018. Netflix is up 78 percent, while Google parent Alphabet has gained 14 percent. For Facebook to regain its mojo, the company will have to beat its forecasts and assuage concerns about regulatory and antitrust risks.

Still, the majority of Wall Street remains bullish. The stock has 40 buy ratings, 6 holds and 2 sells, according to data compiled by Bloomberg. The average price target is $206, representing an implied gain of more than 20 percent from current levels.