When it comes to Facebook (FB) stock, everyone is concerned about two things. First, the falling engagement on the core Facebook platform. Second, regulation could stunt Facebook’s ability to use data to optimize ad solutions. However, neither of these concerns seem all that bad to Nomura analyst Mark Kelley.
In a research note issued this morning, Kelley upgraded FB stock from Neutral to Buy while boosting his price target to $215 (from $172), which implies about 27% upside from Friday’s closing price. (To watch Kelley’s track record, click here)
Kelley commented, “We viewed the addition of an “open Facebook” icon inside Instagram late last year as a red flag, signaling that core FB engagement trends were worsening. But 4Q18 results showed a slight improvement in the DAU/MAU ratio in the U.S. (77% from a dip to 76% in 3Q18), indicating that engagement is intact. Additionally, management suggested it will soon begin to disclose platform-wide MAU figures, which should be better indicators of the underlying trends of the greater business. Mark Zuckerberg’s recent blog post also suggested that engagement could improve as the company looks to focus on encrypted and ephemeral messaging across properties, in addition to the current core functionality.”
The analyst continued, “We continue to believe that increased regulation will be a net positive for large platforms like FB, though there could be some headline risk in the near-to-medium term. On the whole, we do think the negative headline headwinds have largely been exhausted, with little reaction to negative press as of late.”
The Street largely seems to echo Kelley’ positive sentiment, considering TipRanks analytics showcase FB as a Strong Buy. Out of 40 analysts polled in the last 3 months, 34 are bullish on FB stock, 4 remain sidelined, and 2 are bearish. With an upside potential of nearly 13%, the stock’s consensus target price stands at $192.08. (Get TipRanks’ free stock analysis report on FB)