In the wake of the Cambridge Analytica scandal, nearly half of Facebook Inc. members said they planned to use the platform less or discontinue use altogether, according to a Raymond James survey in a Tuesday note to investors. Facebook stock is down 2.2% to $156.39 in afternoon trading. Following the Cambridge scandal involving the improper handling and use of data from about 50 million accounts, nearly 20% of respondents said they would use the site significantly less and 8% said they would stop using Facebook altogether. About one-quarter of those surveyed say they would use the site "somewhat" less. In the longer run, however, Raymond James analyst Aaron Kessler wrote in then note, "While the data appears negative on the surface, we believe the Cambridge story is still fresh in the mind of many users and likely will not have as large an impact as our survey data suggests." Even though many users will use the site less, the site remains the clear social leader with 73% usage, according to the note. Facebook stock is down 11% this year, as the S&P 500 index has fallen less than 1%.
by Max A. Cherney
A general decline in U.S. stocks recently can be attributed to two important events: The first is the risk of a trade war, and the second hits much closer to home.
Facebook FB, -3.93% which counts more than 200 million U.S. users, has fallen by about 20% in less than a week. On Monday, the stock market, as measured by the S&P 500 Index SPX, -0.70% began with considerable strength and then fell, only to rise again. Technically, the reversals started when the market hit a converted level of resistance, but at the same time an investigation into Facebook’s data practices caused that company’s stock to slide further.
The question now is: Is Facebook’s stock oversold?
Read: Facebook could face huge fines in FTC investigation
Overdone selloff
There are a number of factors that go into this observation, but the most important is price. Fundamentals matter, and we will address those, but the stock has broken longer-term, midterm and near-term support. The stock would need to reverse higher slightly to define new support, and so far it has not done that.
In fact, the levels of longer-term support that broke lower are now converted into resistance, and they act as the upside targets. The most pressing issue is to find an entry point, which is something we will see soon. We can’t be sure, but the decline in the stock on the heels of a governmental investigation announcement appears to be overdone.
An investigation like this should be conducted when major data breaches occur. An investigation does not imply negligence, and it would be very hard for me to believe that Facebook was being negligent with user information. My opinion is that user information is viewed as sacred by Facebook, and I expect an investigation to simply be a proper course of process, not a negative event.
If that’s true, the fundamentals clearly play an important role.
PEG ratio
A key metric is where the stock price is in relation to Facebook’s earnings growth. We do this using the PEG ratio (price-to-earnings to growth ratio). Our current observations suggest that the PEG ratio for Facebook is less than 1. Fundamentally, this represents an attractive value.
The stock has clearly broken support levels, a series of them in fact, and it will need to reverse some in order to define new support levels. Once it does, our observations suggest that the stock can bounce back to converted longer-term resistance. Our expectation is not for new highs in the stock, but there’s plenty of room for it to increase even if it were to only pare some losses.
Soon we expect Facebook to be an exceptional trading opportunity for buyers. It has recently been an exceptional shorting opportunity, triggered when support levels broke. We expect that to change soon. The question is when, and for that we simply need to watch price.
Thomas H. Kee Jr. is a former Morgan Stanley broker and founder of Stock Traders Daily.
Raymond James analyst Aaron Kessler noted that Facebook has declined about 14% since March 16 and he believes the shares have discounted many of the recent concerns around Cambridge Analytica and the improper harvesting of users' private information. A Facebook user survey showed that Facebook remains the clear social leader, though it also indicates that 84% of users are "somewhat/very concerned" about how their data may be used and usage is expected to decrease due to recent data concerns, the analyst noted. He believes recent concerns should ease with time, making the shares attractive at current levels, and Kessler reiterated his Strong Buy rating on Facebook.
FB Facebook $160.07 0.68 (0.43%) 03/26/18 WELS 03/26/18
NO CHANGE WELS
Outperform Wells Fargo says FTC announcement expected, buy Facebook shares Wells Fargo analyst Ken Sena says the Federal Trade Commission's confirmation today of an open non-public investigation into Facebook's practices is expected and not a surprise. The break in user and investor confidence creates a buying opportunity, Sena tells investors in an intraday research. The analyst expects continued success at Instagram and points out Facebook shares are now at the lowest valuation levels within his coverage "for a name with still much better overall long-term relative growth prospects." He keeps an Outperform rating on the social networking giant. Facebook shares in afternoon trading are well off the day's lows but remain down 2% to $156.02. Wells Fargo analyst Ken Sena says the Federal Trade Commission's confirmation today of an open non-public investigation into Facebook's practices is expected and not a surprise. The break in user and investor confidence creates a buying opportunity, Sena tells investors in an intraday research. The analyst expects continued success at Instagram and points out Facebook shares are now at the lowest valuation levels within his coverage "for a name with still much better overall long-term relative growth prospects." He keeps an Outperform rating on the social networking giant. Facebook shares in afternoon trading are well off the day's lows but remain down 2% to $156.02. 06:18 Today RILY Today
NO CHANGE Target $2.8
RILY
Buy Digital Turbine should be bought on Facebook-related pullback, says B. Riley FBR B. Riley FBR analyst Sameet Sinha recommends buying shares of Digital Turbine (APPS) following the recent 16% pullback in the shares. The analyst believes the selloff is likely caused by Facebook's (FB) alleged data misuse. Digital Turbine creates data vaults between carriers and partners, and "hence is actually aiding privacy initiatives," Sinha tells investors in a research note. The analyst keeps a Buy rating on the shares with a $2.80 price target. B. Riley FBR analyst Sameet Sinha recommends buying shares of Digital Turbine (APPS) following the recent 16% pullback in the shares. The analyst believes the selloff is likely caused by Facebook's (FB) alleged data misuse. Digital Turbine creates data vaults between carriers and partners, and "hence is actually aiding privacy initiatives," Sinha tells investors in a research note. The analyst keeps a Buy rating on the shares with a $2.80 price target. 06:23 Today LOOP Today
NO CHANGE Target $1700
LOOP
Buy Amazon digital ad spending to benefit from Facebook scandal, says Loop Capital Loop Capital analyst Anthony Chukumba says the recent issues involving Facebook (FB) and Google's (GOOGL) YouTube in customer data protection are positive for Amazon.com (AMZN). The analyst says he "always expected" for Amazon to become a force in digital advertising based on its "extensive user data, technological expertise, and deep pockets", pointing to data management scandal at those firms as a potential catalyst for migration to Amazon. Chukumba keeps his Buy rating and $1,700 price target. Loop Capital analyst Anthony Chukumba says the recent issues involving Facebook (FB) and Google's (GOOGL) YouTube in customer data protection are positive for Amazon.com (AMZN). The analyst says he "always expected" for Amazon to become a force in digital advertising based on its "extensive user data, technological expertise, and deep pockets", pointing to data management scandal at those firms as a potential catalyst for migration to Amazon. Chukumba keeps his Buy rating and $1,700 price target. 07:51 Today BOFA Today
NO CHANGE Target $210
BOFA
Buy BofA/Merrill cuts Facebook target to $210 on increased regulatory risk Bank of America Merrill Lynch analyst Justin Post cut his price target for shares of Facebook (FB) to $210 from $230 citing increased regulatory risk. The analyst, however, reiterates a Buy rating on the shares with his target representing substantial upside from current levels. Facebook closed yesterday up 67c to $160.06. The Federal Trade Commission investigation is significant as it raises risk of civil penalties on data privacy violations, Post tells investors in a research note. And if history serves, the investigation could take multiple years to resolve, the analyst adds. He points out that the FTC/Department of Justice investigation into Microsoft (MSFT) took over a decade. In the meantime, Post sees user and usage erosion, with "negative news flow likely to continue into Q2," as the biggest near-term and long-term risk for Facebook. Bank of America Merrill Lynch analyst Justin Post cut his price target for shares of Facebook (FB) to $210 from $230 citing increased regulatory risk. The analyst, however, reiterates a Buy rating on the shares with his target representing substantial upside from current levels. Facebook closed yesterday up 67c to $160.06. The Federal Trade Commission investigation is significant as it raises risk of civil penalties on data privacy violations, Post tells investors in a research note. And if history serves, the investigation could take multiple years to resolve, the analyst adds. He points out that the FTC/Department of Justice investigation into Microsoft (MSFT) took over a decade. In the meantime, Post sees user and usage erosion, with "negative news flow likely to continue into Q2," as the biggest near-term and long-term risk for Facebook.
FACEBOOK'S shares have nosedived in the wake of its latest privacy blunder, wiping $50 billion (£35 billion) off the company's value.
But what's caused the sharp decline? And can Facebook fix the problem?
Facebook founder Mark Zuckerberg is yet to comment on his company's latest privacy blunder, which has sent his firm's stock prices plummeting
How much have Facebook shares fallen by?
Shares of Facebook fell a further 5 per cent on Monday, March 26, after the US consumer protection regulator said it was investigating how 50million users' data got into the hands of political consultancy Cambridge Analytica.
When markets closed in New York last night, shares had bounced back a fraction to around $160 each, still $25 less than a fortnight ago.
The US Federal Trade Commission confirmed it was probing the social media mammoth's privacy practices.
It comes after more than $50billion was wiped off the value of shares last week in the wake of concerns over data breaches.
Why are Facebook's shares plummeting?
Analysts blamed the decline on investors' reactions to fears of greater scrutiny of Facebook's handling of user data by US and European regulators.
The renewed concern over Facebook's approach to user privacy is fuelled by the platform's latest data breach.
This weekend, a report by The Guardian revealed that a company called Cambridge Analytica had harvested the personal data of 50 million Facebook profiles.
The data had been collected by a dodgy app masquerading as a personality quiz.
This information was allegedly used to map out voter behaviour in 2016 for both the Brexit campaign and the US presidential election.
Cambridge Analytica is a British company that helps businesses "change audience behaviour", and supposedly helped get US President Donald Trump elected.
Facebook Q&A WHAT has happened?
Facebook is accused of passing 50 million users’ information to British company Cambridge Analytica, without their consent. How was the information collected?
In 2014, 270,000 Facebook users took part in a personality quiz on an app on the network. The app harvested information from the person taking the quiz and all their friends. How was it used?
The data was sold to Cambridge Analytica who profiled US users in order to send them pro-Donald Trump campaign messages. Was this against Facebook’s rules?
Harvesting data was allowed but selling it on was not. Facebook said it demanded the data was deleted when it found out about “the breach”. Is this the case?
A whistleblower says this was never checked and all the information was kept, with some still available online.
Theresa May's spokesman called the allegations "very concerning".
And the UK data protection body is seeking a warrant to search Facebook's offices.
Meanwhile advertiser have been telling the social media giant "enough is enough"
ISBA, a trade body which represents major UK advertisers, was set to meet Facebook on March 23.
Adding to its woes, US Congress has called on Zuckerberg to testify to a committee over Facebook's use of the personal information.
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US senators Amy Klobuchar and John Kennedy have also called for a hearing about data security.
They say Facebook founder Mark Zuckerberg, along with other tech executives, must provide answers on the way they treat privacy rights.
Facebook has since suspended Cambridge Analytica.
The company is said to have known about the issue since 2015, but flatly denies that the fiasco was even a data breach.
