Analyst: Facebook Next To Face Antitrust Scrutiny

Antitrust rhetoric, rumors and investigations have been hanging like a dark cloud over some of the largest U.S. tech stocks in 2019, and one analyst said Friday that Facebook, Inc FB will likely be the next company under fire. 

The Analyst

Wedbush analyst Daniel Ives reiterated an Outperform rating on Facebook with a $265 price target.

The Thesis

Regulators and the Department of Justice will likely target Facebook’s WhatsApp and Instagram acquisitions — and whether Facebook buying up potential competitors equates to noncompetitive practices, Ives said in a Friday note. (See his track record here.) 

The antitrust rhetoric surrounding Facebook, Alphabet, Inc. GOOG GOOGL and other big tech stocks is reminiscent of rhetoric surrounding Microsoft Corporation MSFT in the late 1990s and early 2000s, the analyst said.

At the time, regulators’ bark was worse than their bite when it came to Microsoft, and a similar outcome is likely today, he said. 

“We reiterate our opinion that this is more noise vs. the start of broader structural changes across the tech food chain and will likely result in business model tweaks and potential DOJ/ FTC fines (in the billions of dollars) in a worst-case scenario rather than forced breakups of the underlying businesses.” 

Wedbus anticipates that antitrust investigations and potential legal actions will take years to fully play out and will serve as overhangs for the big tech stocks.

In the meantime, Ives said investors should focus on Facebook’s fundamental performance, which remains strong.

Facebook shares were down 1.67% at $177.10 at the close Friday. 

Benzinga’s Take

Antitrust laws are not constructed to prevent companies from becoming too large. Regulators must see Facebook’s actions as preventing competition in the market, which has historically been a difficult case to prove given the limited number of antitrust breakups in U.S. history.

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