Facebook's Two Executive Departures Spell Trouble

Two key executive exits from Facebook (NASDAQ:FB) may slow the stock’s turnaround. Product Chief Chris Cox, who is best known for his role in Facebook’s "News Feed," and Chris Daniel at WhatsApp, have departed. CEO Mark Zuckerberg’s decision to centralize security and the family of apps drove them out.

For the FB stockholder, the two executive departures are a negative development for the company’s near-term prospects. Separating WhatsApp, Instagram, and Facebook would naturally silo the security among the apps. By bringing them together, Facebook gets more control of the user security. Unifying the user accounts will take years, too, as the company changes the infrastructure to accommodate for the change.

Once the integration is completed, the social network may have better control of the ads and the content pitched to user. This ultimately improves the efficacy of ads and may strengthen Facebook’s ad platform.

Valuation

At 22 times earnings and after erasing the stock drop that began in Oct. 2018 and ended in February, FB stock is at the cross-roads. The short-term performance may underwhelm but long time shareholders should do well as the social networking site grows its advertising business.