Facebook, Inc. (FB) Has “Tough Questions Ahead,” But Wells Fargo Stays Bullish

Wells Fargo's Ken Sena does not believe the Cambridge Analytica data scandal will steer FB's advertising business off course.


Facebook, Inc. (NASDAQ:FB) has been dominating Wall Street conversation this week with fears of the Cambridge Analytica data privacy leak weighing heavy on investors’ minds- and on the social media titan’s shares.

On Wednesday, CEO Mark Zuckerberg released a post hoping to ease users’ concerns on privacy and how third-party app developers amass non-public data. All apps with access to big amounts of user information prior to the company’s data access policy revisions four years ago will now be investigated. FB likewise intends to tighten the reins on developers’ ability to access user data and offer users a News Feed tool to show which third-party apps can gain access to data. This will put the power back in users’ hands with a simple manner to rescind data access.

Wells Fargo analyst Ken Sena sees these as “constructive first steps” from the social media empire and continues to “view business impact as likely minimal” from this PR ordeal.

Overall, “We view these as constructive first steps in addressing privacy concerns, though we expect that FB will continue to face tough questions and that senior leadership is likely to be called to appear before legislators in both the U.S. and the UK. In terms of business impact, we see minimal potential revenue impact from announced changes to developer data access. We do not view the changes as a significant impediment to demand for app developer ad products such as App Install and Engagement ads and believe these products represent a relatively small proportion of FB’s total advertising revenue. While problematic in terms of optics/sentiment, we continue to expect that impact on FB’s advertising business from the Cambridge Analytica controversy should be minimal,” Sena contends.

As such, the analyst reiterates an Overweight rating on FB stock with a $230 price target, which implies a close to 41% upside from current levels. (To watch Sena’s track record, click here)

TipRanks shows that this social media leader has landed among one of the most well-liked players on the Street. 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 37%, the stock’s consensus target price stands at $225.94.