Facebook (FB): Will Shares Take the Heat of the Latest Data Scandal?

GBH Insights' Daniel Ives sees negativity that could hit at FB amid the China news, but recognizes a knack for "snap back recovery."


Facebook (NASDAQ:FB) could find itself in hot water yet again after yesterday evening’s New York Times buzz revealed the social media titan has exposed personal data from users with Chinese smartphone companies. This includes Huawei, a tech player that has been at the crux of Trump’s “national security threat” concerns around pivotal 5G technology, which resulted in a closed door to the once-brewing Broadcom/Qualcomm agreement.

Additionally, the article writes of private user access that Facebook granted to Huawei, Lenovo, OPPO, and TCL under the terms of a long-standing deal. This bad press follows another New York Times article that has FB on blast for sharing access to users’ data with a minimum of 60 device makers, which include Amazon, Apple, Blackberry, and Samsung. In light of this, FB has announced intent to “wind down” the Huawei agreement by the close of the week.

The latest negative headlines circling FB and China are “a new worry,” acknowledges GBH Insights analyst Daniel Ives. However, the analyst believes it is a key note to draw that FB expressed the data shared with Huawei remained on the phones- and away from the smartphone maker’s servers.

Ives calls this “the last thing investors wanted to see this morning is a new Chinese data content/privacy issue come to light especially in the heat of the current political climate and negotiations between the US and China,” adding: “Facebook, Zuckerberg and the Street ultimately knew more data privacy and partnerships were going to come out post the Cambridge debacle, however the sensitivity of data partnerships with Huawei will add fuel to the fire of those in the Beltway looking to dig deeper into Facebook’s data situation.”

In a nutshell, “While the jury is still out on this Chinese data partnership news, we could see a negative reaction from the Street this morning as news is digested and fears of more headwinds for Zuckerberg & Co. could be on the horizon in the Beltway. That said, shares have shown a snap back recovery since the Cambridge issue broke as the damage to the company’s $50 billion advertising kingdom and 2 billion+ users has been very contained thus far in our opinion,” Ives concludes.

For now, the analyst remains a bull, reiterating a Highly Attractive rating on FB stock with a $225 price target, which implies a 18% upside from current levels. (To watch Ives’ track record, click here)

TipRanks indicates a strong bullish consensus backing the social media titan. Out of 34 analysts polled in the last 3 months, 32 rate a Buy on Facebook stock, 1 maintains a Hold, while 1 issues a Sell. The 12-month average price target stands tall at $220.39, marking nearly 15% in upside potential from where the stock is currently trading.

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