That's it. Let's look at Facebook (FB) . None other than Playboy, the authority on all things moral, has had enough and is leaving the social media platform. The magazine that some would argue did more to denigrate women by making them sex objects had spoken and says the company doesn't want to be compliant in it customers to Facebook's reported practices, although it admits that it's had difficulty with Facebook because of its platform's policy on nudity which it describes as being "sexually repressive."
According to Facebook's community standards page "people sometimes share content containing nudity for reasons like awareness campaigns or artistic projects. We restrict the display of nudity and sexual activity because some audiences within our global community may be sensitive to this type of content-particularly because of their cultural background or age."
Now there's a policy worth trashing. Thank heavens Playboy didn't close down its Instagram page. Go Playboy! That's hitting them right where it has always mattered to you, below the belt!
Playboy claims to have 25 million fans who engage with Playboy through various Facebook pages and whatever it may stand for, that's lost pageviews. They join the high-minded Elon Musk, always good for a diversion, maybe this time from slow Tesla (TSLA) Model 3 sales or issues with a stretched balance sheet? Cher has abandoned Facebook, too. Strength in numbers!
Here's the issue, though: these departures and others like them, are going to hurt en masse and they make it extraordinarily difficult to value the stock itself, which has been on the ropes ever since we learned about the Cambridge Analytica data breach, some 18% ago.
We know that you can figure out stocks by the earnings and the multiple we want to put on the earnings. Here both are in flux.
That's why I have been trying to come up with in kind scenarios to figure out where this sucker stops with the idea that somebody knows. So I have been using comps that have been regarded as a breach of faith by the customer.
For example there was plenty of outrage when a passenger was dragged off a United Air (UAL) plane. Amid a ton of calls from people who claimed they never would fly United again after repeated, some would say, endless, repeating of an amazing film of the outrage, the stock only fell 6.7%. Facebook breached that level long ago.
When we heard about the egregious cross-selling at Wells Fargo (WFC) , something that caused shock waves throughout the bank's retail client base, we got a 14% decline. I don't see how you can call that anything but a horrendous breach, as the Federal Reserve so deemed it, with the departure of its long-running CEO as well as Fed prodded board turnover. But that's hurt the bank far less than the Cambridge Analytica incident.
So what's next one up the ladder: Target (TGT) , which had a gigantic credit card breach, 40 million people, and the company says on the news for three weeks time. That really hurt them and the stock fell 18.7% and it took a year to recover. That's totally understandable given how easy it was to switch your business elsewhere. It's a real bad sign that Facebook's flirting with this level, because it and Instagram are really the only games in town for the most thoughtful social media -- meaning that Twitter (TWTR) still doesn't have the reach even as it has raised the number of characters from 140 to 280. Of course, Andrew Left from Citron calls the stock uninvestible because it's the possibly the biggest data scofflaw of all. That call was a self-fulfilling home run for certain but it's exhibit A about why you might as well stay with Facebook-Twitter.
Now here's the real worry. If Facebook's stock breaches these levels you have to question if it can travel down a road to a loss of 50% or more, which we saw in the two Chipotle (CMG) health crises as well as the horrific Equifax breach, the benchmarks of lost confidence.
I am betting that's extreme. But how extreme? I think that you can safely say that those incidents are worse that Facebook's if only because Chipotle's "p" and its "e" were decimated and Equifax (EFX) had been regarded as the keeper of everything so how can you keep the stock?
So work backward. We can judge that Facebook's stock is going to go somewhere between 20% and 50%. You want to be totally arbitrary you would pick something like 25%, betting that the stock reflects nowhere near the losses of Chipotle's business. I am betting Equifax can come all the way back because it's harder to switch from Equifax to another company in its industry. That would put the stock at $135 even as I think the torrid growth is unlikely to fall 25% even as it might temporarily overshoot that level.
Extreme? I think you need extreme projections because of the seething hatred so many turned out to have for Facebook. Nevertheless, Chipotle did fall from $758 to $309 only to bounce back to about $534 in the first crash, a shredding of 28%. Hmm, call it $135, again. Let's just say that's the most likely the extreme end game if things get real nasty from here.