Canaccord Keeps The Faith In Facebook, Says Advertisers Will Follow Customers

As Facebook, Inc. FB’s privacy concerns fuel sell-offs prompt a steep drop in the social media platform's share price, Cancaccord Genuity analysts see an attractive entry point.

The Analyst

Michael Graham of Canaccord Genuity reiterated a Buy rating and $240 price target on Facebook.

The Thesis

Facebook has experienced considerable turbulence in 2018. Earlier in the year, Facebook made changes to its feed, causing investors to worry about revenue generation capabilities. In recent weeks, Facebook has seen further turmoil with the Cambridge Analytica scandal.

The solutions to these problems are in the works, Graham said in a Monday note.

“News items will be sourced from more well-known, broadly-trusted sources, more UGC will come from closer friends and videos will be displayed that prioritize 'meaningfulness' over popularity," the analyst said.

Another major concern is that advertisers could scale back their Facebook engagement as a result of the scandal. Tesla Inc TSLA CEO Elon Musk notably removed the Tesla and SpaceX pages from the site.

While concerns over advertiser backlash are valid, advertisers will likely follow their customers, Graham said.

“Advertisers may try to gain a step-function advantage in negotiations with a temporarily weakened FB, but we doubt they will shun the platform in a sustained way if it still works in connecting with customers.”

Price Action

Facebook shares were lower by 2.27 percent at the time of publication Monday afternoon.

Analyst Wonders: 'Will Facebook Do The Right Thing?'

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