The Facebook Data Controversy: What Wall Street Thinks

Facebook Inc FB stock is down more than 9 percent in three days following reports that data from more than 50 million users was improperly shared during the 2016 campaign season.

CEO Mark Zuckerberg said in a post, "The good news is that the most important actions to prevent this from happening again today we have already taken years ago. But we also made mistakes, there's more to do, and we need to step up and do it."

It seems everyone on Wall Street has something to say about the data breach. Here’s a sampling of some sell-side responses.

Voices From The Street

Height Capital Markets analyst Stefanie Miller said Wall Street will likely be more harsh on Facebook than Washington. “Facebook must reckon with investors who are upset that the company appears so reckless in the face of focused regulators, and this could be reason enough for portfolio turnover away from FAANG stocks,” Miller wrote.

Pivotal Research analyst Brian Wieser said the incident introduces new risks for Facebook investors. “Facebook is exhibiting signs of systemic mismanagement, which is a new concern we had not contemplated until recently,” Wieser wrote.

Buy The Dip

KeyBanc analyst Andy Hargreaves said the sell-off has surpassed the regulatory uncertainty at this point. “We recommend investors buy FB at current levels and see potential catalysts in earnings, a reasonable response from the Company, and the passage of the height of negative headline volume,” Hargreaves wrote.

Tigress Financial analyst Ivan Feinseth said the regulatory and customer-related fallout from the data incident won't  be as severe as many trades seem to believe. “I would wait until the storm settles and then I believe we will see an incredible buying opportunity in Facebook,” Feinseth wrote.

Slow To Recover?

Bank of America analyst Justin Post said data privacy is weighing heavily on Facebook’s investor sentiment. “On an isolated basis, we don’t think this story changes the FB thesis, but news flow is beginning to compound, which adds risk,” Post said.

GBH Insights head of technology research Daniel Ives said Facebook will likely continue to struggle until investors get a clearer picture of how the incident will impact the company’s advertising business and content. “We continue to strongly believe this situation if handled well by Zuckerberg & Co. will end up being a ‘manageable risk’ with more noise than actual financial ramifications,” Ives wrote.

Credit Suisse analyst Stephen Ju said the headline risk Facebook faces is backwards-looking rather than forward-looking. “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," he wrote.

CNBC analyst Jim Cramer said Facebook investors are likely getting sick of the stock. "I also think there is a sense of 'why isn't Facebook more aware of the power it has?'" Cramer said.

Ratings And Targets

Despite the rough week, most analysts remain bullish on Facebook. Of course, some are more bullish than others:

• Pivotal has a Sell rating and $152 target.
• KeyBanc has an Overweight rating and $245 target.
• GBH has a Highly Attractive rating and $225 target.
• Bank of America has a Buy rating and $265 target.
• Credit Suisse has an Outperform rating and $240 target.

Related Links:

Twitter Investors Sacred Off By Facebook Privacy Concerns

Analysis: Why Wall Street Could Take It Harder Than Washington