Dubai: Facebook shares, which witnessed the largest daily plunge last week, may be in for another bad week.
Investor concerns were at their peak last week, when Facebook warned of slower revenue growth after the company posted weaker than expected earnings. Facebook shares extended losses on Friday to close at $174.89 (Dh641.85), down 0.78 per cent, a day after the stock plunged 20 per cent, losing about $120 billion in market capitalisation.
“Facebook is having privacy issues at the moment. It does impact revenue generation potential. In the near term we would see some impact on valuation front as investors re-assess the revenue deterioration potential,” Saleem Khokhar, head of equities at First Abu Dhabi Bank’s asset management group told Gulf News.
“There will be continuity in selling pressure. We expect Facebook shares to find a base at lower levels until we receive clarity on the regulatory front with regards to data and privacy issues,” Khokhar said.
On Friday, shares of a few other technology companies like Twitter fell after posting disappointing second quarter results. “There will likely be a read-across to other social media companies,” Khokhar said.
UBS also downgraded its buy rating on Facebook to neutral, and cut its price target to $180 from $212.
“In our opinion, the new growth drivers (Instagram, Watch, Stories, Messenger/WhatsApp, VR) frankly aren’t big enough over the short/medium term to alter the decelerating growth and margin pressure profile of the profit and loss,” Eric J. Sheridan and Alexandra Kasper, analysts at UBS said in a note.
Investors would want more clarity on the user growth and engagement trends in the medium term. Analysts expect wider equity markets to remain stable in the backdrop of receding fears of a trade war ahead of a Fed meeting slated later in the week.
“Fed meeting will happen after strong US GDP data on Friday. We think that the Fed will talk about the possibility of two interest rate hikes,” Naeem Aslam, chief market analyst with Think Markets said.
The Dow Jones Industrial Average closed 0.30 per cent lower to 25,451.06, after gaining 1.5 per cent last week. The S&P 500 index closed 0.66 per cent lower to 2,818.82.
“Markets would be stable to slightly positive as trade concerns begin to calm. We don’t expect any surprises from the Fed Reserve, Bank of Japan and the Bank of England,” Khokhar said.
The dollar slipped on Friday as data showing the US economy rang up its strongest quarter in nearly four years failed to erase worries that trade frictions would be a drag in the second half of 2018.
The dollar index closed at 94.67, down 0.11 per cent, after gaining 0.23 per cent last week.
“The greenback is posting gains against all of its peers and threatens to kick off another bull rally ahead of next week which will be filled with important US data,” Konstantinos Anthis, Head of Research at ADS Securities said. The dollar index has gained 2.76 per cent so far in the year.