'A Buying Opportunity In Facebook': Analysts React To Zuckerberg's Congressional Testimony

Facebook, Inc. Common Stock FB CEO Mark Zuckerberg’s 10 hours of testimony were not in vain.

The two-day congressional hearing over Facebook’s consumer data and influencer security catalyzed an equally long run in the company’s stock, and some consider the rally the start of a greater recovery.

“I continue to believe the weakness caused by this issue is a buying opportunity in Facebook, and once key issues are resolved and new controls put in place, Facebook will continue to trade higher,” Tigress Financial’s Ivan Feinseth said in a note.

Here’s what analysts had to say:

The Grilling Wasn’t So Bad

Height Capital Markets analyst Stefanie Miller called Tuesday’s hearing “cringeworthy” and “an absolute circus.”

Wall Street peers seemed to agree: Congress missed its target.

“Our bullish view on the stock was unchanged by the congressional hearing: Mr. Zuckerberg appeared well-prepared and delivered his answers in a congenial manner, while most of the senators in attendance didn't seem to have a granular enough understanding of the issue to move past surface-level issues,” said Oppenheimer analysts Jason Helfstein, Jed Kelly and Alex Brondolo.

The first day of testimony recorded questions on content transparency, data ownership and potential regulatory options, and Bank of America Merrill Lynch analysts said it struck “no hidden landmines.”

Tigress Financial's Feinseth agreed.

“There were no major negative announcements or concerns raised other than expected rhetoric about the size and breadth that a company like Facebook has over people’s lives and their information,” he said.

Changes Are Coming

Zuckerberg confessed Facebook needs changes, and said it's developed a strategy to improve data control, limit developer access to data and heighten content monitoring with artificial intelligence and human oversight.

Some expect a transformation beyond the namesake platform.

“Facebook has already proposed several changes to allow its users to better protect their privacy, which has been expected and will most likely result in paid levels of services that offer exclusions from advertising,” Feinseth said.

The proposed business model could bode well for Facebook. Feinseth expects a premium offering to generate significant revenue.

Other possible changes aren’t nearly as palatable, according to Oppenheimer. 

“On potential incremental regulation, Senators Markey (D-MA) and Blumenthal (D-CT) both inquired regarding GDPR-style opt-in permissions, which Mr. Zuckerberg agreed with in principle, while not committing to support any specific piece of legislation."

Policy Will Change, But Not Soon

Height Capital Markets suspects Congress will not legislate restrictive policy in the near future, particularly considering Republicans’ resistance to hasty action and Democrats’ insistence on tackling the broad and complex issue without focus.

“Looking at the tobacco industry and its regulatory story arc as an analog, there is reason to believe nothing will materialize out of Congress within the next decade,” Miller said, referencing the 15-year gap between a tobacco industry hearing and the passage of relevant legislation.

Miller pointed to Sen. John Thune (R-South Dakota) as a driver of eventual change, but professed optimism in his openness to collaborate with tech leaders to shape the policy. “That gives these companies room to influence what happens next in the U.S.,” the analyst said.

By Argus’ considerations, even tight regulation may not be so bad.

“We should also consider the law of unintended consequences, as the increased regulation of user data may simply entrench the dominance of industry leaders Facebook and Google,” said analyst Joseph Bonner.

Zuckerberg Proved Himself

The camera-shy CEO exceeded Height’s expectations — a meaningful achievement as Facebook transitions into a new era of community leadership.

“Mark Zuckerberg is worth taking seriously as a CEO,” Miller said. 

Ratings Changes

• Oppenheimer maintained an Outperform rating on Facebook with a $225 price target.
• Bank of America Merrill Lynch maintained a Buy rating and $210 price target.
• Argus maintained a Buy rating and lowered its target from $237 to $214.

Related Links:

The Under-The-Radar Senate Hearing More Meaningful To Facebook Than Zuckerberg Grilling

How Valuable Is Your Facebook Data? Less Than You Think