Facebook Can Sufficiently Fix Its Fake News, Inaccurate Metrics Issues

After dropping 5.6 percent to $120 in the session following the Q3 print, the stock continues to hover around this level. On Tuesday, the stock closed at $119.09.

Problems Galore

Analyst Blake Harper noted that the company announced for the fourth time in the past three months that its measurement metrics, which it reports to its advertisers, were inaccurate. The company stated it is taking steps to re-calibrate these metrics. The company has also launched initiatives to fight fake news spreading on its platform and to counter criticism that it impacted the U.S. election, as well as perverse the quality of its News Feed experience for users, the analyst added.

Harper also pointed to the anti-trust complaint Facebook received from the European Commission regarding its acquisition of WhatsApp and the matching of users between its WhatsApp and Facebook accounts.

Instagram: A Star Portfolio

While expressing confidence the company can fix the issues, Loop Capital said the company still has capabilities to keep advertisers engaged on the platform as they budget for 2017. The firm also pointed to the multiple product updates Instagram rolled out and the 600 million MAU the platform touted. The firm expects Instagram to contribute over 10 percent of revenues in 2017, helping to offset the slowing growth of core Facebook. Accordingly, the firm believes, the company can achieve the consensus revenue growth target of 34 percent, plus, in 2017.

As such, Loop Capital reiterated its Buy rating and a $165 price target on the shares of the company.