Why Citron Changed Its Mind on Facebook
Facebook shares dipped on Thursday following a recent report from the infamous short-selling firm Citron Research in which it seemed to be changing its tune.
Facebook Inc. (NASDAQ: FB) shares dipped on Thursday following a report from the infamous short-selling firm Citron Research. The firm had said previously that Facebook was a long-term short, but now Citron is changing its tune.
Two and a half years ago, Citron said that Facebook was a long-term short and that engagement levels would eventually top out. At the time, the stock was trading near $120 a share. In the past 30 months, Facebook has more than doubled its quarterly revenue and concerns of engagement have shifted to concerns of addiction, yet the stock is back down around $120.
As a result, Citron has come out with a $160 price target, implying upside of 22% from the current price level.
As 2018 comes to a close, it is a year that Facebook shareholders would like to forget, with the stock down 30% in this time. Yet, while the media has reported on one scandal after the next, and the New York Times even tried to promote a #deletefacebook movement, the truth is revenues and the user base have seen little impact.
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Currently, Facebook has 2.2 billion active users and has grown revenues 33% quarter over quarter during this controversial 12 months. Considering the user base excludes China, there is practically no second place.
It also must be noted that the press has resorted to sensationalizing Facebook privacy issues, and that is not intellectually honest. Nowhere was this dynamic more apparent than in the recent “scandal” from the New York Times last week as it published a piece that claimed Facebook let third-party companies like Spotify and Netflix read private messages from Facebook users. The story hit the stock for 8%, but the reality was a lot more innocuous, as explained by Facebook.
Citron concluded the report saying:
Books have been written and movies have been made on the Facebook is evil topic, but never before has Facebook been this compelling of an investment opportunity. As investors have become overly concerned about the short-term noise of privacy and propaganda, they have forgotten to look at the earnings power and potential of the most advanced advertising tool with global reach in messaging, networking, and the future of shopping.
Shares of Facebook were last seen down about 2% at $131.63, in a 52-week range of $123.02 to $218.62. The consensus analyst price target is $186.97.
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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.
