Rare Downgrade Sends Facebook Stock Spiraling

FB stock is staring up at several layers of technical resistance

Sep 4, 2018 at 10:15 AM
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MoffettNathanson downgraded Facebook, Inc. (NASDAQ:FB) to "neutral" from "buy," and cut its price target by $25 to $175 -- in line with the FAANG stock's Friday close. The brokerage firm called slowing revenue growth and increased regulatory pressure a "toxic brew for any stock," and also expressed concern over rising expenses for the social media company. In reaction, FB stock has slumped 3.1% to trade at $170.32.

It's been a rough stretch for Facebook stock following its massive post-earnings bear gap in late July. Since then, the shares have been contained by their 80-day and 200-day moving averages, while the 20-day trendline and year-to-date breakeven mark kept FB in check during last week's broader tech breakout.

Despite these technical troubles, there's still plenty of optimism priced into FB shares. The vast majority of covering analysts continue to maintain a "buy" or better rating on Facebook -- with not one "sell" on the books -- while the average 12-month price target of $211.03 is a 20% premium to current trading levels.

Plus, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 195,133 calls over the last 10 days, compared to 83,439 puts. Even more telling, the resultant call/put volume ratio of 2.34 ranks in the 94th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip. A shift in sentiment from analysts and/or options traders could create stiffer headwinds for FB.

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