Social media giant Facebook is out with earnings after the bell, a release that could come with extra scrutiny.
Platforms such as Facebook have been criticized both for their influence in the political conversation and their response to former President Donald Trump‘s election misinformation. Twitter permanently suspended Trump’s account, while Facebook enacted an indefinite ban.
“The biggest challenge for Facebook specifically is to sort of get over the bad light in which they’re being portrayed, whether deservedly or not,” Todd Gordon, founder of TradingAnalysis.com, told CNBC’s “Trading Nation” on Wednesday. “They’ve obviously had a few, you know, poor incidents that’s reflected on the stock.”
Increased regulation from President Joe Biden and the new administration will likely not be a major concern, though, he said.
“Just look at the price action of Google once Biden was inaugurated. There was all this talk about antitrust in Google coming in and Google ripped as soon as Biden was inaugurated … so I think those concerns a little over overdone,” said Gordon.
As for key levels, Gordon says $280 is acting as resistance in the chart, while $245 should act as support. Facebook crossed above $285 on Tuesday before falling back Wednesday.
Investors may not be as kind to large-cap tech and growth stocks that fail to deliver, said Steve Chiavarone, portfolio manager at Federated Hermes.
“The incremental news flow for some of the big tech and growth names is just not going to be quite as good as it was last year as we emerge from the pandemic. It doesn’t mean it’s going to be bad. I don’t expect their results to be anything terrible. We just think that the trend that emerged since Labor Day is likely to continue,” Chiavarone said during the same segment.
Funds rotated into small caps and value stocks in the back half of last year and out of the large-cap growth stocks such as Facebook and Apple. Chiavarone said this was likely due to their fundamental backdrop going from “awful to just bad,” a shift that investors rewarded, while growth stocks went from “perfect to just good.”
Still, Chiavarone will pay attention to the conference call with CEO Mark Zuckerberg for any insight on advertising spending and what it might tell him about business confidence.
“You’re looking for signs of what’s the business environment likely to be going forward, what do they think recoveries and ad spends might be. What’s the pace of the recovery that they’re building in,” he said. “It’s really just a sign of what are the read-throughs for the broader economy from their window in the advertising spend going forward. I think that’s going to be the biggest macro takeaway.”
Analysts expect Facebook to report $3.19 a share in earnings, up from $2.56 a year earlier, according to FactSet estimates. Sales are forecast to have grown 25% to $26.35 billion.
Disclosure: Gordon holds FB.
