Pivotal's Brian Wieser Sees More Trouble Ahead For Facebook

It’s been a difficult year for Facebook, Inc. FB investors, and one analyst says two recent developments suggest Facebook isn’t nearly out of the woods just yet.

The Analyst

Pivotal Research Group analyst Brian Wieser reiterated his Sell rating and $140 price target for Facebook.

The Thesis

According to Wieser, a new lawsuit questioning the reliability of Facebook’s advertising metrics and allegations that Facebook turned a blind eye to its role in spreading false and hateful anti-Muslim information in Myanmar indicate Facebook management has made a series of critical mistakes that could impact the financial future of the company.

This week, a small business advertiser sued Facebook alleging the company misrepresented its Potential Reach to advertisers. The lawsuit includes testimony from anonymous former Facebook employees who claim Facebook’s Potential Reach statistic is “like a made-up PR number” and that Facebook doesn't care about the accuracy of the numbers it presents to advertisers.

At the same time, Facebook has recently come under fire for the role it allegedly played in spreading disinformation in Myanmar. Facebook’s Free Basics initiative is responsible for providing internet access for the majority of the local population, but Wieser said Facebook hasn't provided enough Burmese-reading content moderators to prevent a widespread Facebook hate campaign against the Rohingya Muslim minority in Myanmar.

“Although we don’t have a tangible sense of financial consequences these situations may bring they are illustrative of systemic mis-management at the company which is mostly under-appreciated as risks by investors,” Wieser said in the note.

Price Action

Facebook's stock traded lower by 1.3 percent on Friday to $172.37 per share.

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