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Facebook Slumps on Concerning Earnings Outlook; Sends Nasdaq 100 Lower

Stocks of Facebook slumped 7% in premarket after the company released its 4th quarter earnings report, which beat estimates but provided a negative outlook for 2020. Facebook reported earnings of $2.56 per share, which was marginally higher than the $2.52 that analysts had predicted. Earnings growth took a huge hit, slumping from 20% in the previous quarter to 8%. Revenues came in at $21.08 billion, which marginally beat estimates of $20.87 billion. Sales only grew 25% from the same quarter a year ago, marking the slowest quarterly sales growth rate since 2016. 

Some analysts have downgraded their price targets for Facebook’s share price by nearly 10%. The message from investors is clear: Facebook’s earnings report did not meet their high expectations. The poor performance of Facebook’s share price is driving the Nasdaq 100 index lower this afternoon, as US markets continue to feel the pressure from the coronavirus-induced overnight selloff in Hong Kong and other Asian indices. Fears of the coronavirus slowing economic activity in Asia continue to spook the markets occasionally, even as the case count increases and the geographical spread of the coronavirus outbreak widens. 

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Technical Outlook for Facebook

Facebook dropped 8% in premarket trading but is now starting to claw back some of those losses as it aims to close the downside gap. Facebook is currently trading at 208.93, which is about 6.8% lower on the day after it recently hit all-time highs above $224. 

Price activity on the daily chart is trying to initiate a bounce off the lower border of the ascending channel. There is also an intervening support line at 208.29. A break below the channel also breaks this support line. If the breakdown of the channel is confirmed, then Facebook may be on its way to interact with the 197.93 support level. A triple top of September 2019, as well as a high of 21 October 2019, form the next support at 190.98. 

On the flip side, a successful bounce could allow Facebook close the down gap and also bring it into contact with the 218.28 resistance line, on its way to retesting the all-time highs seen yesterday at 224.20.

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Facebook Price Chart

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