JEFFERIES: Facebook's data scandal isn't hurting user metrics

Paul Marotta/Getty ImagesFacebook Founder and CEO Mark Zuckerberg delivers the commencement address at the Alumni Exercises at Harvard’s 366th commencement exercises on May 25, 2017 in Cambridge, Massachusetts.

Several high-profile tech icons – including Elon Musk and Apple co-founder Steve Wozniak – have left Facebook in the wake of its data privacy scandal surrounding the firm Cambridge Analytica, but Jefferies says it will likely only be a blip on the company’s financial radar.

“Despite the noise of Cambridge Analytica, time spent on core Facebook has not waned in the days following the announcement,” analyst Brent Thill said in a note to clients Monday. “Compared to March 2017, time spent is up on average by 15% for the month of March 2018.”

The scandal could have some near-term impact though, Jefferies has warned. The firm lowered its price target to $US215 from $US230 – still 37% above where the stock was trading Monday.

“Given the recent turmoil we think it is now more likely that FB will follow through with significant hiring of employees (and consultants) to focus on data privacy and security and this will impact margins for the near future,” Thill said. “We do not see this as a long-term negative as investments are focused on areas to build trust with the consumer which will benefit over the long term (across all properties).”

To be sure, however, new European privacy regulations known as General Protection Regulation, or GDPR, will impact about 20% of all Facebook users when they take affect in May. Jeffries says despite the impact, larger firms like Facebook will be better positioned to weather the new burdens of compliance.

“There could be near term hurdles for Facebook and other big Western platforms may face once the regulations are fully implemented in May,” Thill wrote. “Regulators are likely targeting big American technology companies like Facebook & Google in the first wave of reviewing compliance with the regulation. Additionally, there may be headwinds to average revenue per user (ARPU) in the EU in 2H18 if FB cannot utilise the same level of data for targeting both on & off platform.”

Shares of Facebook have declined by 15% since news of the Cambridge Analytica scandal first broke in mid-March. All eyes will be on CEO Mark Zuckerberg as he prepares to testify before two separate congressional committees on Tuesday and Wednesday.

Check out Business Insider’s full coverage of Facebook’s ongoing privacy scandal:

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