Out of the 43 analysts who rate Facebook an equivalent buy, not one of them has downgraded the stock over the company’s latest data breach hiccup. But many of them do acknowledge the headline risks that could keep shares under pressure for the near term.
The Facebook bulls cite regulatory risk, user backlash, and the possibility that the company takes “radical actions” that may impact the monetization of its data as reasons to be worried. Shares are weaker this morning, though well off lows, after cratering nearly 7 per cent Monday and closing almost precisely at its 200-day moving average of US$172.54.
Here Is What Analysts Are Saying:
Evercore ISI’s Anthony DiClemente (outperform, cuts PT to US$205 from US$225) sees higher risk of regulation and a potential impact to revenue or expense trajectory if users’ materially change their behaviour, which is only expected to occur “at the margin.”
Morgan Stanley’s Brian Nowak (overweight, PT US$230) remains bullish and expects FB to impose stronger restrictions, safeguards and explanation around user data; doesn’t currently see any fundamental risk to revenue or EPS.
SunTrust’s Youssef Squali (buy, PT US$225) data concerns are likely to weigh on shares in the short term, as they raise the specter of consumer backlash and heightened regulatory oversight, but doesn’t see material impact on advertiser demand “given how well this channel performs for marketers.”
Macquarie’s Benjamin Schachter (outperform, PT cut to US$200 from US$205) expects FB to take “more radical actions” than in the past to limit the use of audience segmenting, ad targeting, data sharing, and other privacy related issues; adds that this could lower the monetization of FB data, which is a concern for the financials.
Deutsche Bank’s Lloyd Walmsley (buy, PT US$235) says less worried about direct data leak issues, but rather how scrutiny could ultimately impact the company’s ability to gather and deploy data for ad targeting, which has been critical to ad efficacy and budget growth; calls valuation “extremely compelling” despite increased risks.
Credit Suisse’s Stephen Ju (outperform, PT US$240) doesn’t see any material change to operating expense forecast, though sees shares subject to further headline risk in coming weeks as senior management is summoned to D.C. for hearings with lawmakers.
Raymond James’ Aaron Kessler (strong buy, PT US$230) says past regulatory concerns likely haven’t impacted user engagement or advertising, “though we will continue to monitor the situation”; sees shares already discounting a lot of these concerns.
Stifel’s Scott Devitt (hold, PT US$195) downgraded FB on Jan. 12 for the first time ever as “we didn’t believe the company was moving fast enough to address its emerging platforms issues and that it risked losing consumer trust”; Devitt says views remain unchanged after this latest hiccup.
FB has 43 buys, 3 holds, 2 sells with avg PT US$223 (implies 29 per cent upside to last close).
FB is down 2.2% YTD as of last close and is now the sole member of the FAANG complex in negative territory for 2018 (NFLX +63%, AMZN +32%, GOOGL +4.4%, AAPL +3.6%)