By: Ian Cooper
Some analysts will tell you to buy Facebook FB now as it attempts to find its footing. But to be honest, now isn’t the best time to consider that.
There are two reasons.
One, the stock looks a bit wobbly at double-bottom support dating back to April 2018. Should it fail to hold here, where others suggest buying, we could see a test of $150 shortly. Technically, wait for it to bottom out before buying. And be sure to confirm the move, too. The last thing you want to do is buy a false breakout.
Two, there’s a major trust issue that could cost Facebook millions in ad revenue.
Earlier this year, the company acknowledged that Cambridge Analytica harvested up to 87 million Facebook users without permission. That was six months ago. Mark Zuckerberg even testified before Congress that “We have to do a lot of work building trust back.”
But there’s little evidence that something, if anything has been done.
Just the other week, 50 million accounts were hacked. That quickly led to further decay of Facebook users on the brink of leaving in the last debacle. Some now believe this latest incident could force up to 10% of users not to return to Facebook at all.
And that, they say, could cost Facebook up to $200 million in advertising revenue.
As reported by MarketWatch, “Evercore ISI Securities analyst Anthony DiClemente noted that ‘if the impacted accounts were highly engaged users, we believe there would be a meaningful propensity to log back in, limiting the impact to engagement trends.’ But, he added, for every 10% of impacted users who do not return to the platform because of this breach, ‘Facebook would lose roughly $200 million in ad revenue.’”
So, what happened exactly?
An unknown hacker breached the site, compromising the accounts of 50 million users. While the company found and fixed bugs used in the attack, the damage has again been done.
Trust has again been put in jeopardy.
Worse, not only did the hackers obtain the ability to access the Facebook accounts, they could access other services you use with your Facebook account registration.
To do so, attackers were able to trick Facebook into issuing them “access tokens,” or digital keys that allow them to access accounts as if the attackers were the users. The access keys allowed the attackers to even access any other services that someone used Facebook's login service to log in to, whether that's dating app Tinder, or gain access to highly personal information.
Unfortunately, it’s not clear who carried out the attack.
They may never know. What we do know is that the company patched the problem. And while Facebook doesn’t believe this attack will hurt its business, we’re not so sure. If users can’t trust their data to Facebook, they’ll delete their accounts and go elsewhere, or just stop using Facebook altogether.
It Highlights the Need for Cyber Security
Damages related to cybercrimes are expected to hit $6 trillion a year by 2021.
Unfortunately, despite the scale and potential harm of such attacks, many companies and government agencies still are not prepared.
Up to 75% of all U.S. companies are not prepared.
Up to 65% haven’t devoted the time or resources to prepare.
Microsoft predicts that by 2020 data volumes online will be 50 times greater than what they are today with 111 billion lines of new software code produced each year, including billions of potential vulnerabilities that can be exploited.
For investors, this is another opportunity to look at cybersecurity stocks, such as FireEye FEYE Palo Alto Networks PANW , Fortinet Inc. FTNT , Check Point Software CHKP and Symantec SYMC .