Will Facebook Faceplant on Ad Boycott?

Ed Ponsi

On Thursday after the market closed, Verizon (VZ) announced that it was suspending its advertisements on Facebook (FB). The telecommunications giant is concerned that its ads will appear alongside content that Verizon finds objectionable. 

Verizon joins names like Patagonia, Ben & Jerry's, and the North Face in pulling ads from Facebook. Will this exodus of advertising dollar cause traders to unfriend the social network? Let's go to the charts to find out. 

Facebook has formed an ascending triangle pattern (black dotted lines). This bullish pattern projects the stock to $255.

On Tuesday, June 23rd, Facebook closed at an all-time high of $242.42 (shaded yellow). This proved to be a false breakout, and the stock fell back into its bullish formation. 

Facebook could fall below its trend line, as traders react to the news, but that move is likely to be temporary. That's because Facebook's bullish triangle pattern occurs within a bull channel (blue diagonal lines). 

FB

If traders panic and push Facebook below the border of its channel, I'd look to buy, as the stock's dominant long term trend should win out. Facebook is a strong stock, in a strong sector (social media), in a strong market (the NASDAQ). 

If this sounds familiar, that's because Alphabet-owned YouTube faced a boycott, let by Nestle and AT&T (T), in 2019. In 2018, YouTube was boycotted by Proctor & Gamble (PG), the biggest advertiser in the U.S. In both YouTube boycotts, concerns were quietly resolved and the advertisers returned. 

I'm expecting a similar outcome for Facebook. Make no mistake, these companies want to advertise on the dominant social media platform. 

Facebook's problems are fixable. If traders panic and push the stock lower, it could present an opportunity. 

Comments (2)
No. 1-2
El Toro
El Toro

The companies that are boycotting are brand marketers that focus on where to place their spend to manipulate your feelings about their brand. They are not focused on getting return for every dollar spent. The performance based marketers do focus on the next sale and dominate the online ad space. Example: Patagucci will focus on virtue signaling while Dick's Sporting Goods will focus on selling you a comparable dry fit t-shirt. FB revenue won't be dented by the virtue signals.

Ira_R
Ira_R

This boycott is BS! It’s an excuse for companies to VIRTUE SIGNAL!!