Stifel’s top analyst Scott Devitt is calling out Facebook (FB) for being “unstable.” The analyst suggests Facebook’s management team has created a slew of opponents – too many opponents — including politicians, regulators, tech leaders, consumers and employees to not have long-term negative ramifications for the business. Devitt foresees potential political and regulatory restrictions on Facebook over time. Due to this negative forecast, the analyst drops his rating for FB from Buy to Hold and maintains a price target of $150.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Scott Devitt has a yearly average return of 18.3% and a 64% success rate. Devitt has a 17.9% average return when recommending FB, and is ranked #68 out of 5,121 analysts.
The analyst refers to his SurveyMonkey survey of Facebook users, which showed a great deal of displeasure and distrust for the social media platform. The survey suggests 79% of users believe Facebook’s impact on society is neutral or negative, 74% are concerned with how the company uses personal information, 80% believe the user interface is stable or declining, 68% believe the News Feed is biased, and 71% do not trust the site. Additionally, at least 60% of those who responded to the survey said they rarely or never used the new features of FB, like Stories, Video and Marketplace.
A Facebook staff survey of around 29,000 employees published by the Wall Street Journal showed that 52% were optimistic about the future of the company, whereas last year 84% were optimistic. Devitt reflects on the many members of the extended leadership team, which even includes the acquired companies like Instagram, WhatsApp, and Oculus, who have left FB in the past year.
“In our opinion, there are plenty of places for unhappy Facebook employees to go in Silicon Valley to do interesting work while feeling better about the impact of its employer and maintaining compensation levels. As Facebook tries to rebuild trust outside the company (politicians/regulators, pundits, and consumers), it also need to rebuild the DNA/ culture of its company – not an easy task,” Devitt explains.
“We are adjusting our 2019 operating expense growth to the low-end of company guidance, consistent with history, which lifts our below-consensus 2019 EPS estimate to $7.05 from $6.68 as we previously modeled to the midpoint of opex growth guidance. While there doesn’t appear to be material downside to FB shares, we don’t find the upside as compelling as other companies under coverage. We believe Facebook will struggle to return to the company that it once was or that investors expected it to be in the long run. We prefer Amazon, Alphabet, and Netflix, as U.S.-based mega caps with similar thematic trends and more stable operating environments,” Devitt notes.
Devitt has a less optimistic view toward FB stock, however, this is not the case for many other analysts. TipRanks shows the consensus rating for FB is a “Strong Buy.” Out of 39 analyst, 32 are bullish, 6 are sidelined and 1 is bearish. The consensus price target of $188.31, shows a 36.53% upside from where the stock currently stands. (See FB’s price targets and analyst ratings on TipRanks)