Credit Suisse: Facebook Investors Should Expect Continued Risk After Cambridge Analytica Scandal

Facebook Inc. FB shares were volatile Monday after reports that Cambridge Analytica harvested unauthorized user data through the social networking site in an attempt to collect information on voters in 2016.

While the company should continue to generate long-term revenue, it's unclear how these reports could impact Facebook’s user engagement and subject the company to regulatory measures, according to Credit Suisse.

The Analyst

Stephen Ju of Credit Suisse reiterated an Outperform rating on Facebook with a $240 price target.

The Thesis

Through the use of a personality test app, Cambridge Analytica collected data not only from consenting users, but also from their friends, a violation of Facebook’s privacy policies. The information was reportedly collected in an attempt to influence the 2016 presidential election. 

While this news will expose Facebook to a great degree of headline risk in the coming weeks, the headlines are backwards-looking and have already been addressed by the company, Ju said in a Tuesday note.

“Facebook has already outlined its plans during the 3Q17 earnings call to double headcount addressing user security — so we do not anticipate material change to OpEx guidance," the analyst said. 

That said, Facebook is now exposed to longer-term risks, as the reports could negatively impact user engagement and subject the company to regulatory consequences, Ju said. 

Amid this uncertainty, Ju maintained a bullish stance on Facebook, citing its portfolio of long- and short-term revenue drivers.

“Facebook will be able to drive long term revenue growth without a material lift in ad loads, with near-term growth drivers including Instagram, Premium Video and [dynamic product ads].”

Price Action

At the time of publication, shares of Facebook were trading down 3.8 percent at $166.07.

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