Last week, Facebook (FB) hosted its annual F8 conference, where it showcased new products and discussed its platform’s future. The social media giant recently announced it would become a more privacy-centric network, so much of the focus was highlighting ways it would do that, including a new Clear History feature which allows users to delete any information a third-party website learned about them through Facebook.
RBC’s top analyst Mark Mahaney believes Facebook is living and breathing privacy. He says the company is so serious, it is “willing to take short-term negative actions – even company-[jeopardizing] actions – that will benefit the company (and its shareholders) long-term.” Mahaney favorably compares Facebook’s strategy to Amazon’s “substantial investment cycles over the past two decades,” which produced Kindle, AWS, among others.
Mahaney commented, “What we are struck by is that this is a public management team that is willing to materially change its core platform, with all the risk that this entails in terms of potentially alienating long loyal users. This is also the same management team (largely) that was willing two years ago to de-emphasize news from its newsfeed (thereby potentially reducing engagement) with the goal of enabling meaningful social interaction. And this is the same management team that almost a year ago shocked the investing world by dramatically lowering its revenue and long-term margin guidance. Yes, there were political pressures that helped push these moves. But they were still correct and, arguably, courageous. Name another public company that has trashed its forward estimates like FB did in Q2:18?”
“All in, we came away with the strong impression that product development at FB remains very, very robust,” says Mahaney, as he reiterates an Outperform rating and $250 price target on Facebook stock.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a yearly average return of 24.9% and a 74% success rate. Mahaney has an average return of 19.2% when recommending Facebook and is ranked #29 out of 5,194 analysts.
All in all, privacy has been a major challenge for the largest social network in the world. Following a string of scandals, including the Cambridge Analytica privacy breach and subsequent Congressional grillings, the company is becoming more proactive rather than reactive to privacy. This includes leading a charge for increased regulation, which many say will ultimately help the company as it will help legislators write the rules. But aside from regulation, Facebook is giving users more power over its information, perhaps making users more trusting of the company, which eroded last year.
Facebook stock is a favorite in the stock market, with shares up 41% since the beginning of the year. TipRanks analysis of 38 analysts shows a consensus Strong Buy, with 34 of those analysts rate the stock a Buy, while four rate it a Hold. The price target among these analysts stand at $218.91, which represents about 13% upside from current levels. (See FB’s price targets and analyst ratings on TipRanks)