Top analyst Victor Anthony at Aegis cheers “that went well” for Zuckerberg. True, the Cambridge Analytica fiasco could very well haunt the titan for “some time,” Anthony spotlights share weakness as an enticing bullish opportunity to invest. Even though the analyst has already dialed down his expectations on FB, he praises “a compelling valuation” at play between its “two under-monetized assets” along with opportunity ahead to boost margins.
Therefore, the analyst maintains a Buy rating on FB stock with a $215 price target, which implies a close to 31% upside from current levels.
This process with lawmakers is not about to end overnight and Anthony watches out for “headline risk” above shares. Anthony believes the truth is not rosy here: others will seek to “exploit” Facebook, which means privacy challenges have odds to stick around “indefinitely.” Additionally, the analyst anticipates “some form of regulation on the online media sector forthcoming.” That said, the senators were “not adversarial” when questioning Zuckerberg, which to Anthony bodes positively that legislation a) likely will not be too “heavy-handed” and more importantly b) should not bomb the company’s business model. The company could be willing to accept domestic regulation as well as a paid service without ads- although Anthony notes media content would need to mirror Netflix over short-term content for this prospect to be in Facebook’s favor.
Overall, Anthony pinpoints plenty of reasons to remain confident on this social media titan: 1) Facebook is unlikely to so see an exodus on users from the platform. Most users of Facebook simply do not care about the ongoing crisis; 2) Thus far, with the exception of a few advertisers who went public with their intention to pull ads off Facebook, we believe advertiser loss will be marginal. SMBs and marketers we have spoken with do not plan to pull spend from the platform. However, we do believe FB will be cautious with new ad product launches and the removal of certain partners will have some negative impact on revenue growth. […] 3) Data we have seen shows that Instagram use continues to grow unabated and ad loads continue to increase. That should more than offset pressures from the core FB platform; 4) It bears repeating that Facebook has two under-monetized assets in Messenger and WhatsApp, both of which could be billion dollar revenue opportunities within a short period of time.”