Analysts More Cautious On Facebook Following Security Breach In ‘Tough Year’

In a research note this morning, Argus analyst Joseph Bonner lowered his price target on Facebook shares to $210 following the recently disclosed security breach that compromised personal information of 50M user accounts. However, the analyst argued that the headlines of a “massive” security breach may be excessive. Meanwhile, his peer at Deutsche Bank told investors yesterday that he sees heightened risk to estimates for Facebook after attending an advertising industry event.

ARGUS CUTS TARGET, KEEPS BUY RATING: Following last week’s disclosure that a security breach resulted in the compromised personal information of 50M user accounts, Argus’ Bonner lowered his price target on Facebook to $210 from $237. However, the analyst argued that the headlines of a “massive security breach” may be excessive, since it is not clear whether any accounts were misused, adding that fears of a massive fine may also be exaggerated as Facebook reported the breach within the GDPR-mandated 72-hour window. Facebook is having a “tough year”, with continued fallout from the Russian troll operation in the 2016 election and the Cambridge Analytica scandal, the exit of several senior executives, and the recent report of the breach, he noted. Despite the challenging near-term outlook, Bonner remains bullish on Facebook based on its position as the dominant social media site. Moreover, the analyst told investors that even as flagship Facebook matures, Instagram, Facebook Messenger, and WhatsApp have all reached a critical mass of users and are poised for monetization. He reiterated a Buy rating on the stock. Meanwhile, in a research note yesterday, Deutsche Bank analyst Lloyd Walmsley said he sees heightened risk to the third and fourth quarters and 2019 consensus estimates for Facebook. After attending the first day of AdWeek, the analyst pointed out that he is starting to hear more cautious feedback and that Facebook seems on the defensive, particularly following last week’s data breach disclosure. Walmsley, however, continues to view Facebook as attractively valued, reiterating a Buy rating and $205 price target on the shares.