A major cyberattack is never good for business, nor is it good for a company’s stock price.
T-Mobile US Inc. shares slid this week after the company announced it was investigating claims of a security breach. T-Mobile confirmed Aug. 18 that a subset of company customer data had been accessed by unauthorized individuals. This subset included just over 40 million records of former or prospective customers who had previously applied for credit with the carrier, as well as 7.8 million current T-Mobile postpaid customer accounts’ information. Both figures were subsequently raised on Aug. 20.
Analysts told S&P Global Market Intelligence that customers will likely view the incident as an unfortunate reality of having a cell phone and not a reason to switch carriers.
“In reality, most people aren’t negatively affected enough to consider changing providers or getting rid of their cell phones. It’s just an assumed risk,” Recon Analytics analyst Roger Entner said.
However, data from 451 Research’s “Voice of the Connected User Landscape: Connected Customer, Trust and Privacy” survey shows some consumers rethink their relationship with a business if it suffers a data breach that exposes the consumer’s data. Among respondents who had been notified that they were affected by the breach, nearly 1 in 5 respondents reduced business with the company that was breached. About 15% canceled their accounts and switched to new providers.
T-Mobile shares closed at $140.89 apiece, down 2.8% for the week to date.
In streaming, Netflix Inc. shares popped on Aug. 19 to close at $543.71, up 5.4% for the week to date. During the week, news broke that the U.S. Securities Exchange Commission on Aug. 18 charged three former Netflix software engineers and two others with insider trading that netted the group more than $3 million in profits.
Sung Mo “Jay” Jun, a former software engineer at the company, allegedly led the insider trading ring, accessing data on subscriber growth and trading shares of Netflix prior to earnings announcements. The SEC caught the group by using tools that detect when traders have improbable levels of success trading the securities of a company over a period of time.
“The defendants allegedly tried to evade detection by using encrypted messaging applications and paying cash kickbacks,” Joseph Sansone, chief of the SEC’s Market Abuse Unit, said in a news release. “This case reflects our continued use of sophisticated analytical tools to detect, unravel and halt pernicious insider trading schemes that involve multiple tippers, traders, and market events.”
The SEC’s complaint was filed in federal court in Seattle. In a parallel action, the U.S. Attorney’s Office for the Western District of Washington filed criminal charges against members of the ring.
Pivoting to Cisco Systems Inc., shares of the communications equipment company were up slightly after it reported strengthened revenue growth on its Aug. 18 earnings call.
The company’s total revenue climbed 8% year over year to $13.13 billion in the fiscal fourth quarter ended July 31, as product order growth hit 31%, the highest rate in more than a decade, the company reported. Cisco projected revenue growth of 5% to 7% for fiscal year 2022. The S&P Capital IQ consensus estimate for revenue was $13.04 billion.
Executives on the call said prevailing supply chain concerns may affect future earnings, but Wall Street felt differently. Jefferies analyst George Notter maintained Cisco at a “Buy” rating and upped its price target to $63 from $55.15, saying that Cisco may become financially stronger once supply chain issues resolve.
Cisco shares closed at $57.27 on Aug. 19, up more than 1% for the week to date.
In social media, shares of Facebook Inc. remained stable on Aug. 19 despite the U.S. Federal Trade Commission refiling a case against the company alleging monopoly power for its purchases of photo blogging app Instagram LLC and messaging platform WhatsApp Inc.
The filing, which amends a complaint first introduced last year that was later rejected due to insufficient evidence, claims the social media giant used a “buy-or-bury” scheme to maintain market dominance against its competitors. The filing also states Facebook deployed a surveillance-based advertising model to impose burdens on its users.
“It is unfortunate that despite the court’s dismissal of the complaint and conclusion that it lacked the basis for a claim, the FTC has chosen to continue,” Facebook said in an Aug. 19 tweet.
Facebook shares closed at $355.12 on Aug. 19, down 2.2% for the week to date.
The S&P 500 closed at 4,405.80, down 1.4% for the week ended Aug. 19 after meeting minutes released from the Federal Open Market Committee on Aug. 18 signaled a majority of U.S. Federal Reserve officials are ready to taper asset purchases as early as this year, alongside a weaker retail sales report from the Commerce Department on Aug. 17.