More Changes Likely At Facebook After Ad Boycotts: BofA

Civil rights group Anti-Defamation League has proposed a boycott of advertising on social media sites like Facebook, Inc. FB and Instagram in July to protest their failure to remove hate speech.

While Unilever NV UN and Verizon Communications Inc. VZ have joined other advertisers in halting ad spending on Facebook, Unilever’s decision will have a greater impact, as it is expected to last through the year's end according to BofA Securities.

The Facebook Analyst

Justin Post maintained a Buy rating on Facebook with a $265 price target. 

The Facebook Thesis

As expected, Facebook announced several policy changes Friday, and more are likely to follow as the company engages in dialogue with civil rights groups, Post said a Monday note. (See his track record here.)

Bears may believe that Facebook is in an “unwinnable position,” caught between political pressure to avoid editorializing user-generated content and advertiser pressure to take stronger action against hate speech and misleading content, the analyst said. 

June protests and July boycotts could add more uncertainty around Facebook’s second- and third-quarter results, he said. 

Yet Facebook has managed a crisis effectively before, and the revenue generation around “hateful content” is limited, Post said. 

Facebook still has several under-monetized and under-valued assets and “material e-commerce growth opportunities,” according to BofA. 

FB Price Action 

Facebook shares gained 2.11% in Monday's regular session to close at $220.64.

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