Facebook, Inc. (NASDAQ:FB) has found itself swirling in a publicity uproar ever since this weekend’s buzz: more than 50 million Facebook user profiles have secretly been tapped, and none of these users had been the wiser- until now.
Data analysis and mining firm Cambridge Analytica is at the center of the media circus, considering President Donald Trump used intel gained from this breach allegedly for his own political gain in his 2016 presidential campaign.
Shares have lost 12% in value from yesterday as investors wonder how regulatory oversight will tighten in reaction to the news- and where FB stands in the mix.
Notably one of Wall Street’s best performing analysts chimes in, aware that this situation is certainly far from ideal for FB bulls; yet, there is still a case to be made to stick with FB through the data privacy scandal fire.
Top analyst Youssef Squali at SunTrust understands that negative whispers of a data privacy breach will drag even this social media titan’s shares in the market in the short-term; in fact, he recognizes that these apprehensions are “real.”
However, the analyst cannot help musing about the irony: “what Cambridge Analytica has been able to achieve leveraging Facebook’s data speaks to the potency of the platform.”
Maintaining a “positive” stance for the long-term picture, the analyst reiterates a Buy rating on FB stock with a $225 price target, which implies a 37% upside from current levels.
The Cambridge Analytica snafu cultivates a dangerous risk of “consumer backlack” for all of social media, and especially for the FB empire- including acquisitions Instagram, Messenger, and Whatsapp, explains Squali. However, the analyst does not believe advertisers will react negatively to the reveal. As far as advertiser investment gains are concerned with Return on Investment (RoI), FB continues to be “attractive” here. The analyst adds, “Facebook/Instagram is still one of the best performing platforms at scale for marketers with no real alternative, given its size, analytics tools and global reach.”
Bottom line, “These raise the specter of consumer backlash and heightened regulatory oversight in the US and the EU ahead of GDPR’s adoption. We believe the negative fall-out from this is raising mgmt’s urgency/resolve to tackle this existential issue. We also believe FB’s lower expected FY18 margins already reflect higher investments in ads/content quality, but we do not see a material impact on advertiser demand given how well this channel performs for marketers,” Squali concludes.
Youssef Squali has a very good TipRanks score having earned one of the highest rankings of #56 out of 4,778 analysts with a 71% success rate. Squali yields 20.1% in his annual returns. When recommending FB, the top analyst realizes 26.1% in average profits on the stock.
TipRanks indicates FB as a stock with a strong bullish backing on the Street. Out of 32 analysts polled in the last 3 months, 29 rate a Buy on the social media darling, 2 maintain a Hold, while 1 issues a Sell on the stock. With a healthy return potential of nearly 40%, the stock’s consensus target price stands at $227.37.