Facebook Inc (NASDAQ:FB) stock keeps teasing investors but just can’t achieve a new 52-week high. On the other hand, it isn’t really heading in the other direction either, remaining range-bound for the time being. The current 52-week high is $128.33, and Facebook stock hasn’t traded below $120 per share since last month. So what would it take to derail the Wall Street darling?
Twitter acquisition would damage Facebook (FB) stock
InvestorPlace feature writer James Brumley has some ideas. Perhaps the most interesting is his argument that investors would severely penalize Facebook Inc (NASDAQ:FB) if it were to acquire Twitter, and it’s easy to see why. Twitter has been greatly published for not being the next Facebook, and Brumley believes one reason is because Facebook “appeals to uses’ vanities,” while Twitter doesn’t. The social network is all about me, me, me, whereas Twitter is more about current events.
In its effort to differentiate itself from Facebook Inc (NASDAQ:FB), Twitter Inc (NYSE:TWTR) set a 140-character limit on posts and has been struggling to catch up to the social network since going public. It’s pretty difficult to say much of anything in 140 characters, and the average social media user doesn’t really understand how to use the micro-blogging platform or even why they might want to use it.
Twitter cofounder Jack Dorsey has been trying to turn things around by introducing a slew of new features, but so all efforts have been in vain. If the micro-blogging platform ever does find a rescuer like LinkedIn found Microsoft, it might have a better chance with a fresh set of eyes. However, Facebook Inc (NASDAQ:FB) seems like an unlikely candidate. It has no need to acquire a failing competitor, and investors certainly would take it out on the social network’s stock if it made a decision to do so.
Then again, Facebook Inc (NASDAQ:FB) has made acquisitions that others thought were questionable before, such as the pricey purchase of WhatsApp or the acquisition of Oculus, which left people scratching their heads for a long time. It seems so far that the company has made wise decisions in terms of acquisitions and found a way to make them work, but it seems unlikely that it would be possible to do the same with Twitter.
Facebook challenged by messaging competition?
Brumley also argues that a “killer alternative messaging app” could also weigh on Facebook Inc (NASDAQ:FB) stock. Investors have been chattering about Snapchat for some time as concerns about whether it will be a Facebook killer swirl around Wall Street. However, analysts from multiple firms have tried to reassure them, saying that Snapchat is no real threat.
It’s true that the social network was able to find the right price for WhatsApp and Instagram, both of which were threats in their own ways. However, what if serious competition arose and refused to sell? In this case, Brumley suggests that Facebook might drive users away by over-monetizing or simply showing too many ads.
Indeed, television shows us just how much consumers hate ads, as cord-cutting has become a common practice. Why watch loads of ads and also pay expensive cable bills? The average consumer seems to be willing to either view some ads in exchange for free service or pay for a service in exchange for not seeing any ads. However, there will be a point where users will be apt to see another social network that’s just as good as but doesn’t have as many fewer ads and then decide to jump ship.
Too much garbage?
Brumley also suggests that users might become fed up with all the garbage that’s on Facebook (my words summing up his viewpoint). He notes that consumer satisfaction with the social network has declined 9% over the last year, according to the American Consumer Satisfaction Index. His view points more back to how much advertising the social network shows, but in reality, there is truly a growing amount of noise on the platform. Add to that the growing number of studies which show that Facebook use can cause or contribute to depression, and you may have a problem.
Facebook Inc (NASDAQ:FB) stock slipped by about 0.3% to as low as $123.51 in afternoon trades on Friday.