Newsletter
A-3D-printed-Facebook-logo-is-seen-in-front-of-a-displayed-stock-graph-in-this-illustration-taken

Analysts Haven’t Fallen Out of Love with Buying Facebook

by -

New FactSet data shows that nine out of ten analysts still consider Facebook stock a buy.

This, despite the massive controversy surrounding its unauthorized leak of 50 million users’ personal data.

Why “Buy”?

Since the leak to the dubious political consulting firm, Cambridge Analytica, made its way into the spotlight, Facebook’s market value has taken a $90 billion nose dive. However, analysts have not given up. Among brokers covering the stock, 90 percent continue to have a “buy” rating for the company. This, according to a report recently released by FactSet.

The only company analysts feel more strongly about in terms of future outlook is Amazon. That online marketplace has taken and kept the hearts of the highest number of analysts.

Furthermore, analysts have a better opinion of Facebook stock than of other social network companies such as Snap and Twitter.

Why are Analysts Feeling Optimistic?

The “buy” attitude toward Facebook during a time when it is about to be slapped with a plethora of legal and regulatory issues seems counter-intuitive. After all, the Cambridge Analytica is far from the only scandal into which Facebook has been embroiled. Even as the latest drama was far from the only one facing Facebook.

Facebook is already the subject of an investigation by the U.S. Federal Trade Commission (F.T.C.). The company’s founder and CEO, Mark Zuckerberg, will soon be testifying before U.S. Congress. At the same time, the U.K. parliament wishes to address him, though, to their frustration, he sent deputies in his stead.

Thirty seven American state attorneys have written to Zuckerberg, calling for answers regarding the lengths to which the company has and has not gone in order to keep user data secure. It feels like every passing day brings a fresh lawsuit.

Still, analysts feel Facebook is strong enough to withstand it all. They’re confident that any losses resulting from legal and regulatory changes will not reduce its long-term potential.

Facebook’s Future

Despite the questionable protection of user personal information, Facebook has accumulated such a large amount of data from its approximately 2 billion active users that there simply isn’t any real competition at the same level. It is, in essence, in a class all of its own, particularly when it comes to marketing opportunity.

FactSet’s data is based on tracking 45 analysts who have published a recommendation regarding stock. Their average target price is about $220 on the company’s shares. This is approximately 40 percent higher than the stock’s current trading price. Moreover, it is 14 percent greater than the stock’s record high.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.