Facebook, Inc. (NASDAQ:FB) shares plunged 14% last week on the heels of the Cambridge Analytica data and privacy breach that left over 50 million user profiles vulnerable to tapping.
Top analyst Michael Graham at Canaccord deems this “one of the sharpest FANG selloffs in memory,” and as FB takes a beating, this presents quite an “opportunity” to buy.
Therefore, wagering in fact that “FB valuation looks even more compelling here,” the analyst reiterates a Buy rating on FB stock with a $240 price target, which implies a 55% upside from current levels.
Keep in mind, CEO Mark Zuckerberg’s brainchild was not the sole giant stricken with bearish fear, as Google fell 10%, Amazon dove around 6%, and Netflix slipped roughly 6% in the market.
“Sometimes, market dynamics give investors a chance to buy strong companies at a discount, when stocks get marked down due to news or events that are unlikely to make a big difference over the long term. We believe the events of last week are likely to continue playing out in the press with minimal mid-term impact on FB’s business, and we suspect this will prove to be an attractive entry point for FB stock,” writes the analyst.
Noting that the company had already sought to address certain challenges circling through the media maelstrom, Graham is “more concerned with potential advertiser backlash.” Yet, all the same, the analyst remains unfazed: “Advertisers may try to gain a step-function advantage in negotiations with a temporarily-weakened FB, but we doubt they will shun the platform in a sustained way if it still works in connecting with customers.”
Facebook’s guide for grow looks robust and with regards to the bigger picture for EPS expectations for this year, “this is likely the low point.”
Bottom line, “Even in a bearish scenario in which revenue growth slows to 20% (roughly $4 bn lower than our current estimate), the stock would still be trading at a P/E multiple roughly equal to the growth rate,” Graham concludes, saying that in a nutshell, there is “limited downside” risk for FB shares.
Michael Graham has a very good TipRanks score with a 59% success score and a high ranking of #146 out of 4,757 analysts. Graham yields 15.1% in his yearly returns. When recommending FB, Graham earns 25.4% in average profits on the stock.
TipRanks showcases a strong bullish backing for the social media titan. Out of 32 analysts polled in the last 3 months, 29 are bullish on FB stock, 2 remain sidelined, while 1 is bearish on the stock. With a return potential of 45%, the stock’s consensus target price stands at $225.63.