- Facebook could slip even more, according to Pivotal Research’s Brian Wieser.
- Facebook shares have dropped sharply since the Cambridge Analytica scandal in mid March.
- Wieser lists three core reasons for lowering his Facebook price target to $US138 a share.
Facebook’s stock price could have further to fall, according to Pivotal Research’s Brian Wieser.
Wieser moved his price target to $US138 from $US152 Monday. Wall Street’s consensus on Facebook is $US219. Wieser rates the stock a sell.
Wieser cites three main reasons for his lower price target:
- Firstly, Facebook’s costs will increase. “Facebook and Google will need to incur additional expense beyond those previously contemplated to better know their partners, including developers with their ecosystems, advertisers and users,” the note said. Additionally, “costs should be noticeably higher for Facebook beyond the present year as it seems more likely than not that they will need to incur additional expenses to address operational challenges,” Wieser wrote, referring to operational challenges that may result from data regulation.
- Secondly, the Cambridge Analytica mishap will cause advertisers to restrict their ad spend on the platform. “The Cambridge Analytica episode is forcing more advertisers to scrutinize their spending on the platform and our guess is that scrutiny will have some additional negative impact,” the note said. And while “the company will produce significant growth in 2018,” Wieser thinks “revenue growth will continue to decelerate and margin compression will be incrementally more pronounced.” He estimates that revenue will grow 33% in 2018, but just 25% in 2019.
- Thirdly, Facebook’s dialogue with both the US and EU governments will create headline risk. “The company also faces all sorts of headline risks both around the upcoming Congressional hearings and also around similar hearings in other countries,” the note said.
Facebook is down 14% on the year.