Facebook Inc (FB)’s Tepid Outlook Is Bad News For Market: Traders

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Facebook Inc (NASDAQ:FB) could have bad news for the markets, according to Fast Money traders. Fast Money debated recently if the momentum rally in technology stocks is over after Facebook’s tepid outlook, reports CNBC. Facebook dropped despite posting strong quarterly numbers.

Is Facebook (FB)’s dip bad for technology stocks?

According to CFO David Wehner, advertisement load could come down significantly next year due to limits on ad load. He added that next year would be a year of strong investment with a substantial hike in expenses.

According to trader Brian Kelly, the danger with crowded stocks like Facebook Inc (NASDAQ:FB) is that sell-offs can pick up pick up steam quite fast if momentum moves towards the downside, regardless of the fundamentals. However, trader Guy Adami believes there is a very good chance that the S&P 500 retests levels near 2,043 even before the momentum in technology stocks is over.

On Wednesday, the index had its seventh straight negative session, closing at 2,097.94. Investors who want to be in technology should pick value stocks like Apple and Alphabet over growth stocks such as Facebook, Netflix and Amazon, said trader Tim Seymour.

Referring to Wehner’s comment about major investments, Josh Olson, an analyst at Edward Jones, said investment in the business should benefit the tech giant in the long term.

“We have been down this road before with Facebook, they have invested something like this in mobile and we have seen it pay off. So we are looking at it as an opportunity.”

Slow growth warning offsetting strong quarterly numbers

On Wednesday, the world’s largest social media network warned that its growth will slow, offsetting the strong earnings that beat Wall Street estimates. After the social networking site had warned that its revenue growth would slow this quarter, its stock fell 7% in after-hours trading to $118.21.

This drop made investors doubtful about if the social media giant can continue its runaway success like before, even though it reported steady growth and robust mobile ad numbers. In the latest quarter, its growth rose to nearly 1.8 billion monthly users.  In addition, the social networking giant reported a better-than-expected 56% rise in quarterly revenue, to $7.01 billion.

Last week, Alphabet announced profit growth and strong revenue as well, while conventional media companies like The New York Times are finding it difficult to stem ad revenue declines, notes Reuters.

On Wednesday, Facebook Inc (NASDAQ:FB) stock closed down 1.8% at $127.17.

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