Facebook Stock Forecast: FB Stock Plummets Amid Data Scandal


This article was written by Esther Hanon, a Financial Analyst at I Know First.

“There are no secrets that time does not reveal”

— Jean Racine

Image result for facebook logo wikimedia commons

 Facebook Stock Forecast: FB Stock Plummets Amid Data Scandal:


  • Facebook shares closed down almost 6% on Tuesday and have tumbled almost 18% since March 16, when Facebook first acknowledged the Cambridge Analytic scandal.
  • The Cambridge Analytica (CA) data scandal has sent Facebook stock tumbling, which can be viewed as a buying opportunity for investors.
  • Cambridge Analytica collected profile data from millions of Facebook users, without those users’ permission, and used that data to build a massive targeted marketing database based on each user’s individual likes and interests.
  • Facebook bears a huge amount of culpability for allowing CA to get its data to begin with, though Facebook states, “its explained right there in the app” through a loophole in their API

On Monday, March 19th, investors saw Facebook stock plummet as much as 6% after the Federal Trade Commission announced it is investigating Facebook’s data practices in the wake of the Cambridge Analytica leak of 50 million users’ information. The stock cratered as news got out that Facebook was in the midst of the aforementioned data scandal, proposed by Cambridge Analytica, a firm who has been gathering data from Facebook users as early as 2015 and throughout the Presidential election. Cambridge Analytica supposedly has been providing information about Facebook users during the past 4 years to potentially aid in the presidential elections, an action Facebook claims users should have “known about”, considering they control their privacy settings on the Facebook site. Nonetheless, at the time of writing, Facebook CEO Mark Zuckerberg has been reluctant to appear in front of the UK Parliament to answer questions about data abuse (Update: Zuckerberg is supposedly scheduled to appear before Congress). 

[Source: Yahoo Finance, March 27th, 2018]

So what exactly occurred in this data scandal?

Between 2013 and 2015, Cambridge Analytica collected profile data from millions of Facebook users without those users’ permission, and used that data to build a massive targeted marketing database based on each user’s individual likes and interests. Using a personality profiling methodology, the company, formed by high-powered right-wing investors for just this purpose, began offering its profiling system to dozens of political campaigns. CA was able to obtain this data in the first place due to a loophole in Facebook’s API that allowed third-party developers to collect data not only from users of their apps but from all of the people in those users’ friends network on Facebook. Facebook’s data collection from users came with the stipulation that such data couldn’t be marketed or sold — a rule CA promptly violated, and has been violating for years.

However, in its newest software version, Facebook’s Messenger application requests that those who download it give it permission to access incoming and outgoing call and text logs. But, as users discovered when prompted to download a copy of their personal data, a certain amount of data was ‘covertly siphoned’ without explicit permissions. Buried inside those data caches was an unsettling amount of specific, detailed information—in some cases, every phone call or text message ever sent or received on their Android device. Dylan McKay, who apparently owns an Android phone, reported that for the period between November 2016 and July 2017, his archives contained “the metadata of every cellular call I’ve ever made, including time and duration” and “metadata about every text message I’ve ever received or sent” (See here.) When people like McKay agreed to share their contacts with Facebook, it appears they didn’t know the extent to which they were giving Facebook access to their personal information. Additionally, users typically do not know where to search for their downloaded data, nor do they expect third party firms to siphon their information from places like Facebook. Ultimately, if Facebook was aware of such actions, they should have been more transparent with their user base as this demonstrates a breach of trust.

[Source: Twitter (Dylan McKay)]

Although remaining relatively silent since the news broke out, Facebook responded to the madness with a blog post laying out the applicable user-agreement terms and denying that Facebook collects call or SMS data secretly or surreptitiously. “Contact uploading is optional. People are expressly asked if they want to give permission to upload their contacts from their phone—it’s explained right there in the apps when you get started,” the company said in a statement to the Guardian. “People can delete previously uploaded information at any time and can find all the information available to them in their account and activity log from our Download Your Information tool.”

Facebook possesses a huge amount of responsibility for allowing CA to get its data to begin with. However, reports calling CA’s data harvesting a “leak,” a “hack,” or a serious violation of Facebook policy are all incorrect. According to some, all of the information collected by the company was information that Facebook had freely allowed mobile developers to access.  As a Facebook spokesperson reiterated to the New York Times, “No systems were infiltrated, and no passwords or sensitive pieces of information were stolen or hacked.” Essentially, the data that CA took from Facebook — mainly information gleaned from user profiles and interests — wasn’t private to begin with, not really. It’s just that the vast majority of users either didn’t really know it wasn’t private or didn’t really care. Generally, apps aren’t placing their fine print front and center when we’re using them, nor are they priming us to think too hard about what the long-term or large-scale ramifications of providing our data — and in this case, our friends’ data — could be.

But the revelation couldn’t have come at a worse time for Facebook, which is trying—and failing—to dig itself out from under the Cambridge Analytica fiasco. On Sunday, the company released a full-page print advertisement in the U.K.’s The Observer, The Sunday Times, Mail on Sunday, Sunday Mirror, Sunday Express, and the Sunday Telegraph, along with American newspapers The New York Times, The Washington Post, and The Wall Street Journal, in an attempt to regain public trust. In the ad, Zuckerberg called the Cambridge Analytica leak a “breach of trust” and apologized, reassuring readers that “we’re now taking steps to ensure this doesn’t happen again,” but so far it seems to have missed the mark. According to a poll from SurveyMonkey and Axios published on Monday, Facebook’s already-low favorability rating has dropped twice as much as that of other tech giants from October 2017 to March 2018.

[Source: imgflip.com]

When Cambridge Analytica began collecting this data, Facebook was remained mum about the subject — at least until 2015, when it finally updated its third-party API to block access to the kind of massive data sets that Cambridge Analytica was collecting. That year, without publicly alerting users that its API had been exploited, it drastically limited what features third-party apps could access. It also instituted a review of any third-party app that asked for more than the usual amount of data — public profile, list of friends, and email address — from its users. By 2015, of course, CA had already gotten the bulk of its user data from Facebook users — most notably from their profile pages, where user interests and likes provided the company with the building blocks of personality profiles it created to help determine whether users would be susceptible to different kinds of political messaging. Arguably, all of that user data should have been private from day one, a “privacy by default” experience that some internet advocacy groups have been begging Facebook to implement for years. The fact that it wasn’t suggests that in the beginning, at least, the exploitability of Facebook’s API was seen as a feature, not a bug — because no one was thinking that a third-party app might utilize its access to user data at the scale Cambridge Analytica did.

Ultimately, I believe that FB stock is currently a buying opportunity, as the stock has dropped immensely in the past 12 days. Time will tell what will occur with Facebook stock, as Zuckerberg will be appearing before the Congress, in an attempt to explain and declare exactly what had happened with the data scandal, among other reasons why Facebook engaged in a breach of privacy against their users. Facebook will undoubtedly need to be extremely careful with where their data is stored and who had access to it, as users will surely demand more transparency with their data.

Analyst Recommendations:

According to analyst recommendations from Yahoo Finance, the current consensus is a “Buy” in Facebook Stock, with 17 advising a “Strong Buy”, and 24 advising a “Buy”.  Analysts are expecting investers to buy in on Facebook stock as the stock price is fairly inexpensive, and prospects show that the stock will rise in the future.

[Source: Yahoo Finance]

On March 14th, 2018 I Know First published a bearish forecast for Facebook, demonstrating a bearish outlook for the 1-month time horizon, 3- month horizon, and 14-day horizon. As seen in the above image, between March 16th and March 28th the stock fell rapidly in response to the scandal announcement. Just 3 days later, on March 17, Facebook stock continued to plummet when news had broken out that Facebook was engaged in a data scandal giving away tons of precious user information. Ultimately, on March 21st, FB stock managed to gain some points as the algorithm had predicted with the slightly bullish forecast. Eventually, the stock reversed into a decreasing state where the stock continued to fall for days as more information leaked out about the data scandal, and as more people became aware of it. These actions pertaining to the stock directly mimic and parallel the forecasts predicted by the algorithm. Therefore, both the stock path and the forecast were accurately predicted as the algorithm had forecasted, and fell in accordance with its predictions. Simply, the stock had fallen immensely over the past few days. Moreover, the forecasts for the various time horizons portray that Facebook stock is expected to continue dropping by greater measures in the future periods.

Below is the I Know First forecast from March 27th, demonstrating the continued effect FB stock will take in response to the data scandal.

Current I Know First subscribers received this bearish forecast for Facebook on March 27th, 2018. 

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I Know First Algorithm Heatmap Explanation:


This indicator represents the predicted movement direction/trend; not a percentage or specific target price. The signal strength indicates how much the current price deviates from what the system considers an equilibrium or “fair” price.

The signal strength is the absolute value of the current prediction of the system. The signal can have a positive (predicted increase), or negative (predicted decline) sign. The heat map is arranged according to the signal strength with strongest up signals at the top, while down signals are at the bottom. The table colors are indicative of the signal. Green corresponds to the positive signal and red indicates a negative signal. A deeper color means a stronger signal and a lighter color equals a weaker signal. The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Analogy with a spring: The signal strength is how much the spring is stretched. The higher is the tension the more it’ll move when the spring is released.


This measures the importance of the signal. The predictability is the historical correlationbetween the prediction and the actual market movement for that particular market. For each asset this indicator is recalculated daily. Theoretically the predictability ranges from minus one to plus one. The higher this number is the more predictable the particular asset is. If you compare predictability for different time ranges, you’ll find that the longer time ranges have higher predictability. This means that longer-range signals are more important and tend to be more accurate.

Predictability is the actual fitness function being optimized every day and can be simplified explained as the correlation-based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

To subscribe today and receive exclusive AI-based algorithmic predictions, click here.

About Facebook

Facebook, Inc. (NASDAQ: FB), incorporated on July 29, 2004, is focused on building products that enable people to connect and share through mobile devices, personal computers and other surfaces. The Company also enables people to discover and learn about what is going on in the world around them, enables people to share their opinions, ideas, photos and videos, and other activities with audiences ranging from their friends to the public, and stay connected by accessing its products. The Company’s products include Facebook, Instagram, Messenger, WhatsApp and Oculus. The Company also engages in selling advertising placements to marketers. Its advertisements let marketers reach people based on a range of factors, including age, gender, location, interests and behaviors. Marketers purchase advertisements that can appear in multiple places, including on Facebook, Instagram, and third-party applications and Websites.