Privacy setting shortcuts are displayed on Apple Inc. iPhone 6 smartphone screen as a FaceBook Inc. logo is seen in this arranged photograph taken in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

What Wall Street Is Saying About Zuckerberg's Response to Crisis

(Bloomberg) -- Analysts are split on what Mark Zuckerberg’s response last night on its data security crisis means for the stock. BofAML’s Justin Post cut his price target to $230 from $265 and said that usage trends may be hurt by the crisis and subsequent negative press. But Piper Jaffray and Cowen advised using the recent selloff as a buying opportunity. Facebook shares are down 2.8 percent pre-market and down about 11 percent this week after Zuckerberg’s statement and his interview on CNN last night.

Piper Jaffray, Samuel Kemp

  • Rates overweight, PT $210
  • "There’s a lot of negative sentiment baked into FB after the revelation of data extraction by Cambridge Analytica and Facebook’s botched PR responses"
  • "Without a doubt, we think Facebook could have done better in securing user data and communicating after the fact"
  • "However, we would take advantage of FB’s selloff (off 8% since Mar-16) as we believe the long-term relevance of the extraction is minimal and the near-term catalyst chain is more likely to be positive"
  • "We do not believe this will yield meaningfully restrictive regulation as the collateral damage to smaller publishers would be significant"

BofAML, Justin Post

  • Rates buy, cuts PT to $230 from $265
  • "Short of a direct apology, we think Zuckerberg addressed the issues and a long recovery process can start"
  • "That said, there was nothing that could be said to appease the most vocal critics, mainstream backlash will persist as Cambridge Analytica remains in the headlines, and we would expect some impact to near-term platform usage"
  • "At this point, we are not aware of any advertisers publically indicating reduced spend in response to the recent controversy, which suggests limited 1Q financial impact"
  • "However, with ’#deletefacebook’ hashtags trending and the onslaught of negative Facebook headlines (Uber had a similar situation last year), we have to consider the potential that some portion of users reduce usage of the platform"

Cowen, John Blackledge

  • Rates outperform, PT $220
  • "CEO Zuckerberg’s FB post & CNN interview struck the right balance of acknowledging FB made some mistakes & plans to be proactive protecting user data going forward, giving us more confidence FB will be able to navigate these issues"
  • "In his initial FB post yesterday afternoon, Zuckerberg took full responsibility as founder of FB, a good first step in our view given user trust is a central issue"
  • "FB’s proactive push for ad transparency tools that already accomplish much of what Congress is seeking in current bills that are pending"

RBC, Mark Mahaney

  • Rates outperform, PT $250
  • "We view the medium- and long-term risk-reward as very compelling, though we acknowledge rising long-term regulatory risk and near-term user/usage volatility potential"
  • Views Zuckerberg’s statement and actions as "delayed – but appropriate – responses and steps by Facebook, and believe they should help address some of the recently rising user concerns"
  • "We do believe there may be near-term pressure (Q1 and Q2) on user and engagement growth at Facebook, given all the negative media attention on the data controversy at the company"

Morgan Stanley, Brian Nowak

  • Rates overweight, PT $230
  • Mark Zuckerberg’s public statements on Facebook’s data leak are an important first step in the company’s efforts to self-regulate and improve data privacy on its platform
  • Further forthcoming data safeguards will reassure users that Facebook is acting more proactively and decisively to protect their data
  • Self-regulation is a key step in Facebook’s efforts to reassure users, advertisers, politicians, and investors of its commitment to maintaining a safe environment

Bloomberg Intelligence, Jitendra Waral

  • "Facebook’s margins are more likely to be affected than sales as it faces regulatory risks and ramped-up spending on compliance following an alleged data breach"
  • "Facebook’s dominant market share could make it hard for advertisers to abandon the platform, while investors may look to take profit after a 54% stock price run during 2017"

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