Facebook Inc (FB) stock rallied this week, gradually recovering what it lost on Monday after one analyst boosted his price target and a second said he feels the new regulatory concerns are overblown. Meanwhile, short interest in Facebook Inc (FB) stock has climbed dramatically over the last six weeks, indicating that short-sellers are just waiting to see the mighty fall.
In a note this week, FBN Securities analyst Shebly Seyrafi reiterated his Outperform rating and $210 price target on Facebook Inc (FB) stock and explained a long list of factors that have been weight on it, none of which sound like they could be the company’s own fault. He feels that The Washington Post‘s story regarding former President Barack Obama and Facebook CEO Mark Zuckerberg was the first domino that started this week’s cascade in Facebook stock.
Apparently, Obama told Zuckerberg to take the fake news threat seriously, not mentioning Russia specifically. Then earlier this month, Zuckerberg said they would hand over details on more than 3,000 ads that related to political issues and may have been linked to Russian accounts.
This incident is now putting pressure on tech companies to disclose the buyers of political ads and the dollar amounts spent on them. Senators Warner and Lobuchar are pushing for legislation requiring this, which would impose a new regulatory burden on Facebook Inc (FB) and other tech companies. Seyrafi feels that all the concerns about regulation are “way overblown,” however.
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The FBN analyst also stated that there is a general rotation out of technology stocks right now and into banks and the Russell 2000. He noted that Facebook Inc (FB) stock isn’t the only one of the FAANG group (Facebook, Amazon, Apple, Netflix, Google) that’s been falling recently, as shares of the entire group have pulled back over the last week or so. He predicts that next month when Facebook and other tech names report their earnings, there will be a rotation back into technology names.
It turns out that short-sellers have been expecting a decline in Facebook Inc (FB) stock as they’ve been circling the entire FAANG group for about the last six weeks, according to data from financial analytics firm S3 Partners. The firm’s research head, Ihor Dusaniwsky, said in a note this week that short-sellers have tacked on $1.93 billion in bearish bets against the entire group, marking a 7.6% increase since mid-August. Short interest in Facebook Inc (FB) has increased $494 million since then, and as the shares continue to rise, he expects short interest to keep growing.
One thing that probably helped turn Facebook Inc (FB) stock back around this week was the price target increase from Deutsche Bank analyst Lloyd Walmsley. He boosted his target by $5 to $220 and reiterated his Buy rating after increasing his estimates for the company’s next earnings report.
He described his latest set of ad checks as “encouraging” and added that his conversation still indicate strong growth in same-client ad budgets for the third quarter. He also found that ad buyers are very eager to try the social network’s new ad products. As a result, he increased his ad revenue growth rate for the third quarter to 42%. He believes that Facebook Inc (FB) has the greatest upside to estimates over the next six to 12 months.
In fact, Walmsley termed Facebook Inc (FB) as “the new IBM (in a good way).” He said that in the same way that IBM was a most-own in enterprise tech, Facebook is becoming a must-own stock in advertising.
Facebook Inc (FB) stock closed up 1.27% on Friday at $170.87.