As Facebook’s stock plummets, analysts warn of new “enhanced risks”
It’s been a rough weekend for Facebook. Ever since the company suspended Cambridge Analytica from its platform, admitting that the Trump-affiliated data firm misused millions of people’s personal data, Mark Zuckerberg’s social network has been in hot water. In the United States, Facebook is seeing increased scrutiny along with the threat of heightened government oversight. Abroad, Facebook could be subject to astronomical fines for mishandling users’ data.
The market has begun to respond, and Facebook shares have already dropped nearly 6%. The share price closed Friday at a little over $185, and it is currently a little north of $175.
Analysts, too, are beginning to fear the repercussions. Last night, Pivotal published a new report that detailed Facebook’s new “enhanced risks.” While this didn’t change the target price or the firm’s “sell” rating, analyst Brian Wieser sees a potentially foreboding future for the stock.
“We think this episode is another indication of systematic problems at Facebook,” he wrote, adding that the company’s business will likely not be impacted “for now.” Still, Wieser sees a few things on the horizon: “Regulatory risks will intensify … Enhanced use of data in advertising is at greater risk than before … Third party measurement partners may face more restrictions, frustrating advertisers.”
Other analysts have also chimed in. According to Peter Stabler of Wells Fargo, “This episode appears likely to create another and potentially more serious public relations ‘black eye’ for the company and could lead to additional regulatory scrutiny.” Daniel Ives of GBH Insights added that “modest changes to their business model around advertising and news feeds/content could be in store over the next 12 to 18 months.”
The latest controversy could be the beginning of some hard times for Facebook unless it shapes up its act and quick.