Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Facebook (FB) Adds Privacy Tool; Top Analyst Remains a Bull on the Stock

The company that is often criticized for generating revenue by invading user privacy is implementing new tools to protect just that — user privacy. 

Facebook (FB) is allowing users in Ireland, Spain and South Korea to better control the social network’s ability to track them outside the Facebook platform by launching the “Off-Facebook Activity” tool. The tool will allow users to disconnect Facebook’s tracking of users on non-Facebook sites. The move comes as Facebook looks to raise user confidence and regain trust, after a host of privacy scandals hit the company.

While some are concerned about what less access over user data would mean for Facebook’s business, 5-star Suntrust analyst Youssef Squali is maintaining his Buy rating and $236 price target on the stock. 

Though Facebook may be in the good graces of some for the move, Squali points out that the data is disconnected but not deleted. This could be a good thing for the company — while the headline reads positive, the fine print tells investors that the business itself should not take a hit, as the company is still able to use past data to tailor ads to users. On this loophole, however, Squali says the company “appears to fall somewhat short” of CEO Mark Zuckerberg’s pledge of allowing users to “flush their history whenever they want.” 

Notwithstanding the fine print, Squali “believe[s] the impact of the new tools will be relatively limited” as the three countries represent only a fraction of Facebook revenue, while “a global release will take some time to happen.”

But perhaps most importantly is the way in which this tool will be implemented — manually. Instead of Facebook automatically enabling the tool for its entire user base, users must manually go through the process of turning it on. So even when this is released globally, Squali believes “requiring users to go through settings options to make changes to their privacy likely increases friction enough to discourage and limit mass adoption of the new tool.” As a result, the analyst thinks, “any impact would be gradual and take place over several quarters, at the earliest.” 

Facebook is playing a balancing act with privacy. On the one hand, the company must regain user trust, which means limited access to data. On the other hand, investors expect the company to use data to generate revenue. The Off-Facebook Activity tool seems to accomplish both: While the headlines make it seem that Facebook is doing good, the fine print shows the company will still generate money off users, even if they decide to opt-out of tracking. 

All in all, the social network giant continues to be one of Wall Street’s favorite stocks, even amid privacy challenges and increased scrutiny. TipRanks analysis of 36 analysts shows a consensus Strong Buy, with 33 of analysts rating the stock a Buy and only three suggesting Hold. The average price target among these analysts stands at $234.40, which represents about 31% upside from current levels. (See FB’s price targets and analyst ratings on TipRanks)


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