Facebook, Inc. (FB) CEO Mark Zuckerberg finally broke his silence regarding the data scandal involving Cambridge Analytica, and the general consensus seems to be simple: not good enough. Multiple analysts cut their price targets for Facebook stock following his statement, although a few perma-bulls are convinced that he took a good first step toward regaining users’ and investors’ trust.
Advertisers are an entirely different category, however. Today, it was revealed that a trade body representing big advertisers in the U.K. plans to meet with Facebook management and demand assurances while threatening to tell advertisers to spend their budgets elsewhere.
A “reasonable” statement from Mark Zuckerberg
Bank of America Merrill Lynch analyst Justin Post cut his price objective for Facebook stock from $265 to $230 per share and maintained his Buy rating. He called Zuckerberg’s statement “reasonable,” noting that he did acknowledge his company’s responsibility to protect the data of its users. He also said that they put some fixes in place years ago and are planning to make even more changes. What many were disappointed by was the lack of a direct apology, although Post feels that there isn’t anything the Facebook CEO could say “to appease the most vocal critics.”
Post noted that other big tech firms, including Netflix, eBay and Uber, have successfully repaired their brands in the past, and he thinks Facebook will also be able to do so. However, he also points out that such recoveries do take time.
Facebook stock placed in the “too hard” pile
Stifel analyst Scott Devitt is at the other end of the spectrum on Facebook stock, as he’s one of the few analysts who doesn’t have a Buy rating or the equivalent on it. He maintained his Hold rating and slashed his 12-month price target for Facebook stock from $195 all the way down to $168 per share.
Like Post, Devitt brought up eBay as a comparison for the social media firm. He described Facebook as “an unstructured content business built on trust that lost that trust prior to implementing policies to add structure and process,” drawing similarities between it and the eBay of 2004. He also suggested that Instagram might be able to save Facebook in the same way PayPal saved eBay, although it will take some time, especially since the social media firm is much bigger than eBay was and the reputation damage seems much worse.
Devitt summed up his report by declaring that he has assigned Facebook stock to the “too hard” pile in a manner similar to what Warren Buffett does with problems that seem too big to fix soon. He even went on to say that in addition to buying all of his Buy-rated stocks, he would also buy many of his Hold-rated stocks before he would buy Facebook stock. That’s quite a strong statement about a company that was a Wall Street darling only six to 12 months ago.
Did Mark Zuckerberg really take a step in the right direction?
GBH Insights analyst Daniel Ives is holding just as steady as ever on Facebook stock, and he was far less critical of what Mark Zuckerberg had to say than most other analysts. He maintains his Highly Attractive rating and $225 price target on Facebook stock.
He believes that the most important point from Zuckerberg’s blog post about the data problem is that the company continues to state that last week was the first it had heard that the user data it told Cambridge Analytica to delete had never been deleted. Some media outlets have reported that the social media firm knew in 2015.
Ives feels that Mark Zuckerberg took a “big step forward” by addressing the data issue and taking responsibility for what happens on Facebook’s platform. While much of the commentary about his blog post suggests that people are not satisfied with what he said, Ives expects the post to “help users, advertisers, and investors feel more comfortable that Facebook and Zuckerberg are starting to get their arms around this issue.”
Facebook stock remained volatile in intraday trading on Thursday, first rising early before reversing course again and ending up back in the red. As of the time of this writing, the stock is down 1.55% at $166.76 per share.