3 Worries For Facebook: Fake News, Ads And Analytics

While mentioning three investor concerns around Facebook Inc FB, SunTrust Robinson Humphrey’s Bob Peck noted in a report that none of these were currently significant enough to impact the company’s financials.

He maintained a Buy rating on Facebook, with a price target of $142.

Peck explained that investors were questioning “the rising complexity in algorithms needed across a widening product set for Facebook to repel bad actors and reinforce user and advertiser confidence.”

Fake News

These concerns surround the impact of fake news on user behavior and ad revenue. Facebook has now shut down access to FAN and is making algorithm changes to keep the content off its social platform. Peck added that the cumulative impact of these sites, even when the U.S. election season peaked in October-November, was likely less than 1 percent.

Ad Quality

Lower quality ads have entered the system, with some exaggerated and misleading headlines, although Facebook’s intention is to maintain the highest quality standards. The analyst noted, however, that the impact on the company’s financials seems to be very low.

Analytics

“Facebook announced another update on metrics and reporting, including restatements to some organic reach numbers and other items. Critically, the paid reach metric, which drives advertiser ROI, was not restated and customer billings not impacted,” the SunTrust report stated. While this may impact advertisers' view of the platform, it would likely not impact budgets, Peck commented. He added that the potential revenue risk was less than 1 percent.