Is Facebook, Inc. (FB) a Sell?

Facebook, Inc. stock is under pressure as the company is criticized across the board for not taking users’ privacy seriously. Reports suggest that Mark Zuckerberg is set to testify to a U.S. House committee on April 11. Problems for Facebook started with it was revealed that data firm Cambridge Analytica exploited Facebook vulnerabilities to harvest data of millions of users, mostly in the U.S.

A number of analysts think that the problems for Facebook will widen in the future. Earlier this week, Pivotal Research’s Brian Wieser cut his price target for Facebook to $138, citing slowing growth and increasing challenges and expenses. Wieser believes that Facebook’s revenue will grow in 2018, but the company will begin to experience deceleration in 2019. The analyst thinks that Facebook, Inc. (FB) stock is under threat from “headline risks” that are on the horizon amid Facebook’s upcoming statements in front of U.S and European authorities.

On Wednesday, Morgan Stanley downgraded Facebook stock and cut its price target to $200 from $230. The firm’s analyst Brian Nowak said in this report that growing tensions regarding data privacy will create problems for Facebook in terms of ad revenue. Facebook, Inc. (FB) recently announced that it will stop giving access to third party data providers, and will close Facebook API widely used to app development. This will result in more checks and balances, which are good for users, but bad for advertisers and Facebook’s ad revenue base. Nowak also said that Facebook already plans to increase its capital spending by 2% due to data safety measures. The analyst expects Facebook ads revenue to slowdown in 2018 and 2019.

Facebook is swiftly implementing policy changes to comply with the new European privacy laws coming into affect next month, if EU authorities are not satisfied with the changes, the social media company could be facing fines of up to 4% of its global revenues.

Facebook CEO Mark Zuckerberg tried to undo the damage on Thursday, saying the latest developments didn’t have a “meaningful” impact on the company’s business. But Facebook’s fundamentals may be also entering choppy waters.

Facebook’s monthly active user growth in US and Canada may be hitting a ceiling and the company is seeing the younger demographic jump ship.

Statistic: Number of monthly active Facebook users in the United States and Canada as of 4th quarter 2017 (in millions) | Statista

Find more statistics at Statista

Facebook also recently announced newsfeed changes resulted in less time spent on the platform. All these changes may have a negative cumulative effect on earnings and most likely result in pressure on Facebook’s stock value in the near future.

Free books, reports and subscriptions...