Stocks

Facebook Stock Rallies After Data Scandal Update

Facebook data scandal facebook stock
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Facebook Inc (FB) CEO Mark Zuckerberg finally addressed the press on a conference call on Wednesday, and it seems that investors have been placated, at least for now, despite the new revelations that came from that call. Apparently, the Facebook data scandal exposed many more users than initially thought, as Zuckerberg said they now believe 87 million users were affected, versus the 50 million originally estimated.

Facebook data scandal addressed

Zuckerberg is scheduled to testify about the Facebook data scandal involving Cambridge Analytica before U.S. lawmakers next week, and the significant increase in the number of affected users will likely increase the pressure he will face. The Facebook chief executive also warned that it will likely take years to fix the company’s data problems, although they plan to assign about 20,000 workers to fixing the platform’s security by the year’s end. The step-up in investments will also increase the company’s operating costs over the next two years.

One of the big concerns stemming from the Facebook data scandal has been the #DeleteFacebook campaign, which has resulted in well-known names such as Elon Musk deleting his companies’ Facebook Pages. However, Zuckerberg assured the media and investors that the campaign hasn’t caused significant numbers of users to flee the platform. Investors cheered that news by boosting Facebook stock in premarket trading this morning, although GBH Insights analyst Daniel Ives warned in a note this morning that the shares may remain range-bound for now due to fallout from the data scandal.

Facebook not out of the woods yet

Bank of America Merrill Lynch analyst Justin Post doesn’t expect the increased number of users affected by the Facebook data scandal to have any big impact on the company’s stock. He said the fact that the scandal hasn’t caused users to abandon the platform outweighs the greater number of profiles affected by it.

However, he also warned that the danger for Facebook stock isn’t over yet, as the investigation could reveal even more apps and advertisers that weren’t following the company’s rules about data. He also said that regulators will want to know why it was possible for third parties to even access user data through searches on Facebook. He maintains his Buy rating and $210 price target on Facebook stock.

Facebook stock may have finally hit bottom

Deutsche Bank analyst Lloyd Walmsley said in his note on Mark Zuckerberg’s conference call that he is now “cautiously optimistic” that Facebook stock has bottomed out. He noted that a key issue in the Facebook data scandal is the question of whether the company violated the consent degree reached with regulator in 2011 was violated. He believes the Federal Trade Commission will rule that it was not violated, although he also warned that the agency could ask for the company to make even more changes under pressure from the fallout of the data issue.

Facebook stock surged in premarket trading this morning, although it turned lower after opening bell but remained in the green. As of the time of this writing, Facebook stock is up 2.71% at $159.30 per share. The shares briefly touched $161.58, the highest level in about two weeks.