Facebook, Inc. (FB) could be poised for a comeback.
Facebook's executive departures from their "crown jewel" Instagram is grabbing headlines, but experts are noting this decline might be overblown.
The loss of founders Kevin Systrom and Mike Krieger certainly pressured shares this morning, as the stock fell over 3% in early morning hours.
If recent departure of WhatsApp founder Jan Koum is any indication, a comeback may be in order for Facebook.
Upon Koum's resignation on April 30 this year, the stock price stood at $172 per share. From that point, up until the company's earnings call in July, the stock grew to almost $220 per share.
"When you look at acquisitions, especially in the tech space as we've seen with companies like Google (GOOG) , there will inevitably be departures," Aegis Capital Corp. analyst Victor Anthony told Real Money. "Founders never stay on board forever."
He said that while the disagreement in the top ranks is a concern, he thinks that investors are overreacting and not realizing that Facebook CEO Mark Zuckerberg is first and foremost a businessman.
"Sometimes founders lose sight of the fact that they are running a business," Anthony said. "Zuckerberg needs to get a return on his investments."
When it comes to revenue generation, Instagram has still plenty of room to grow.
While Instagram boasts one billion users, it is only due to chart $6.8 billion in ad revenue this year. This compares to the nearly $40 billion that Facebook managed to generate with its just over two billion users.
The parallel to WhatsApp is again useful, as its founder was vocal in his disapproval of advertising, which helped lead to his acrimonious exit from the social media giant.
"Advertising isn't just the disruption of aesthetics, [it is] insults to your intelligence and the interruption of your train of thought," he wrote in a blog post in 2012. "Remember, when advertising is involved you the user are the product."
Due to his principles on the subject, he vehemently opposed advertising on his platform and said the company would not become "another ad clearinghouse."
Unfortunately, this hurt monetization of the entity which was unacceptable to Zuckerberg and yield-hungry investors.
Since the Ukraine-born businessman's departure from WhatsApp, Facebook has moved swiftly to monetize the 1.5-billion-person strong user base the app holds, announcing new advertising campaigns in August and September.
Investors will certainly be looking for early results of this program during the company's earnings call in October.
Harami Candlestick Pattern
As Facebook gains back its losses felt on the shock announcement last night, it is important to note signs of reversal.
"We can see that the two most recent candles look like a harami pattern - a two-day reversal pattern." Real Money's in-house technical analyst Bruce Kamich pointed out this morning.
He suggested traders will "be poised to probe the long side" on the current weakness.
Though he noted that confirmation of this trend must be borne out in the charts tomorrow, he said he is optimistic that it will.
Facebook stock has pared its losses of over 3% this morning to just 0.04% as of 1:27 p.m. in New York, indicating a recovery might already be underway.
So while the announcement this morning might take some "shine off Facebook's crown jewel" as the Action Alerts Portfolio team said of the stock in their report this morning, it shouldn't be a reason for panic or cause investors to ignore a possible long play on the company.