Why One Analyst Is Cutting Facebook Ahead of Wednesday’s Hearing
Facebook shares slid on Tuesday after a key analyst took a big step back on the social media giant. Overall the firm is calling for slowing growth with increased regulatory scrutiny, which could spell disaster for the stock.
Facebook Inc. (NASDAQ: FB) shares slid on Tuesday after a key analyst took a big step back on the social media giant. Overall the firm is calling for slowing growth with increased regulatory scrutiny, which could spell disaster for the stock.
MoffettNathanson downgraded Facebook to a Neutral rating from Buy and cut its price target to $175 from $200. The firm believes that the revenue growth deceleration coupled with the company’s long-term margin guidance does not provide a meaningful near-term path for outperformance, hence the downgrade.
Looking at the near term, the brokerage firm expects to see Facebook’s margin deleverage to slow 2019 operating income growth down to the low teens, which should limit further multiple expansion. Not to mention Facebook’s chief operating officer, Sheryl Sandberg, will face questions from a congressional committee on Wednesday.
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Currently, MoffettNathanson believes that investors are questioning whether to believe Facebook’s latest outlook for significant growth deceleration given that the last time management delivered a doom-and-gloom forecast, it turned out to be a false alarm. If Facebook beats its own guidance, there could be even greater obstacles to clear before convincing the market that business conditions are back to normal.
Shares of Facebook were last seen down 2% at $171.58, with a consensus analyst price target of $211.03 and a 52-week range of $149.02 to $218.62.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
