Facebook (NASDAQ 🙂 keeps making headlines for all of the wrong reasons.

Wall Street’s bears are claiming that this time, “this time is different” in the case of controversial social-media giant Facebook. It’s trying to rebound from Frances Haugen’s explosive interview on 60 Minutes as well as one of Facebook’s worst outages for over a decade.

Facebook is facing a backlash that threatens to boil over. However, this is not the first time Facebook has been under such severe pressure. In 2018, FB shares plunged by over 40%. The decline was exacerbated by a wider market sell-off. FB stock eventually reached its bottom and has since moved on.

The stock is my opinion, so I’m bullish. Apple’s privacy-focused iOS15 update is a direct jab at the company’s advertising business.

Earnings don’t lie, however. Mark Zuckerberg will likely find a way to get out of this latest mess, regardless of Facebook’s extraordinary operating margins. (See Analysts’ Top Stocks on TipRanks)

Perfect Storm

It is possible that FB stock could experience another implosion of 2018 proportions. As the FAANG trade has some flaws in its armor, the broad markets might move to correction territory.

Facebook stock may see a wider weakness in FAANG trade, which could push it towards $250. It will it be deserved? Most likely not. Nevertheless, almost everyone hates this business.

The company’s latest disaster will be over soon, but anger at the company won’t last, as earnings are likely to drive the stock back to its original direction.

FAANG could be disowned by FB stock, since the trade is expected to heat up. It seems likely that there will be a 20% decline. Facebook, which is currently at 14% below its peak, has already passed the halfway mark to a bear market. For those who are willing to wait, the valuation is simply too great to miss.

Cheapest FAANG stock could get cheaper

FB stocks trade at 24.7 times trailing earnings. For a company with an average of over 22% bottom-line growth during the last three year, this is quite cheap.

However, there is a chance that the economy will reopen and the future landscape for social media may prove less favorable over the next 18 month.

Combine that with the possible margin and top-line hit from Apple’s privacy-focused update and Facebook could have a much more turbulent three years. What about the churn?

In response to iOS’s recent update, Facebook has already decided to reduce the reporting of ads by 15%. There is a possibility that the actual number could be much higher. This adds uncertainty to the iOS effect. When you consider the possibility of anti-trust lawsuits or congressional action as a result of whistleblower’s testimony being disclosed, the real extent and risk is likely to be higher than it was in 2018.

It is not likely that any Congress action will be taken overnight. A bear-case Facebook scenario seems unlikely.

Wall Street Take

TipRanks analysts rate Facebook stock as a strong buy. There are 31 analyst ratings. One Sell recommendation, five Hold recommendations, and 25 Buy recommendations.

The average Facebook price target is $419.87. The price targets for analysts range from $300 to $500 per share.

The Bottom Line

As many Street users oppose FB stock it is easy to be critical of the company. But that doesn’t mean they are wrong.

FB may be the cheapest FAANG stock and investors could underestimate its ability to transform for the better.

Disclosure: Joey Frenette was a shareholder in Apple shares at publication.

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