Wall Street is still friending Facebook (FB) despite the persistently bad press confronting the company.
Shares of the social media giant opened Monday's trading positively directly after an op-ed from CEO Mark Zuckerberg published in the Washington Post.
The positive move is encouraging, as it indicates the market can get behind Zuckerberg having a voice in reform strategy, alleviating worries of more heavy-handed regulation for a company as heavily criticized as Facebook.
"What people have to recognize is that Facebook is a hated company," Action Alerts PLUS portfolio manager Jim Cramer said on Monday morning. "The question is: Has the well been spoiled and you can never take it back?"
Cramer advised that a high-profile hire of an independent advisor on privacy issues could lead to a big move in the stock and could well be Zuckerberg's next move given his stated seriousness on the issue.
"I like Facebook," he said, adding that the secular trends that Instagram is tapping into is the key story for speculators, not necessarily the now well-known risks that come from governments across the globe that appear navigable.
Analysts have largely stayed onside as well, even as the FTC, SEC, EU, and a slew of other acronym-denoted agencies continue to probe the company.
The consensus remains a "Buy" rating in the analyst community and a FactSet poll has placed a Wall Street's price target at $197.27 following a slew of price target raises amidst the company's over 20% run year to date.
"Overall, while we recognize the risks around Facebook's evolving product strategy and corresponding organizational changes, we believe engagement continues to be strong and monetization improves as investments around Video, Stories, and Messaging, among others, begin to deliver ROI," JPM Securities analyst Ronald Josey commented.
He advised further that any negative share reaction in the near term is an opportunity to add to positions rather than pull off.
"We acknowledge that continued negative headlines around safety, privacy, and regulatory risk, potential challenges as Facebook evolves to a more privacy-focused platform, and the [recent] service outage are all likely to impact shares in the short term," Josey acknowledged. "[But] with 2.7 billion users, continued strong engagement, and among the best targeting and monetization tools across the internet, we recommend taking advantage of any dislocation in shares."
The focus on the business upside is a common theme among those following the stock, as many have noted a shift in strategy toward Facebook Stories, WhatsApp, Messenger, and Instagram as the keys to unlocking unrealized value for shareholders.
"Improved ad performance can lead to higher pricing in the auction market and given we believe pricing is still 20-50% lower on Stories, the high incremental margin nature of improved pricing has the potential to lead to meaningful top and bottom-line revisions," Morgan Stanley analyst Brian Nowak advised. "We remain "Overweight" on FB."
To be sure, the regulation risk is never something to lose sight of, especially when it could mean billions in fines from regulators in the European Union alone.
The good news for investors is that Zuckerberg is looking to get ahead of the criticism and keep that headwind from obscuring the tailwinds many analysts and investors have built their bull case behind.
(Facebook is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells FB? Learn more now.)
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