Guggenheim Upgrades Facebook As Investors 'Gain Comfort' With Content, Privacy Concerns

Facebook, Inc. FB investors appear to have gained "comfort" with the multiple content and privacy concerns, Guggenheim says in a new note.

The Analyst

Guggenheim Partners' Michael Morris upgraded Facebook from Neutral to Buy with a price target lifted from $175 to $200.

The Thesis

Facebook's usage trends remains overall "solid," Morris wrote in the note. The core Facebook app has reached maturity in the U.S. market but this is offset by Instagram's momentum and growth in international markets. Other initiatives including a push into e-commerce and monetizing messaging properties represent opportunities that are "attractively priced" at the stock's current level.

Video initiatives are still "un-developed" so the financial opportunity for Facebook remains limited without recognizable content and direct exposure on the TV screen, the analyst said.

There are still three key topics of debate surrounding the stock, including:

1. Will Instagram, Stories and Messaging generate incremental growth?
2. Will a year of investments in 2019 translate to margin growth in 2020?
3. Are competitors ahead of the curve in terms of satisfying consumers and privacy regulators?

Despite several key topics of debate, Facebook shares should move higher given its above-average growth rate and the stock is trading at only a "modest" premium to the overall market, according to Morris.

Price Action

Facebook's stock trade higher by 1.6 percent at $176.21 per share Thursday afternoon.

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