Facebook (NASDAQ: FB) Experiences a Triple Whammy Today as Deutsche Bank, Mizuho and Raymond James All Cut the Stock’s Price Target
Facebook (NASDAQ:FB) continues to feel the heat from its disclosure of a slump in advertisement revenue. As a case in point, the social media titan saw its stock price target slashed today by three financial sector heavyweights.
First, the Deutsche Bank (ETR:DBK) analyst, Lloyd Walmsley, slashed Facebook’s stock price target to $200 from his earlier guidance of $280 but retained a ‘Buy’ rating for the stock. Notably, the lowered target still constitutes an upside potential of 12.21 percent. The analyst has slashed industry-wide online advertisement estimates and now projects a bottoming of ad spending in Q2 2020 followed by an “uncertain recovery” beginning in Q3 and continuing into 2021.
Next, analyst James Lee at the Japanese banking behemoth Mizuho (TYO:8411) lowered Facebook’s stock price target today to $220 from an earlier projection of $240 while maintaining a ‘Buy’ rating for the stock. The lowered target now corresponds to an upside potential of 23.43 percent for Facebook from the current price level. The analyst noted that the social media giant’s revenue growth continues to decline amid the ongoing economic deceleration. Consequently, Lee has now slashed Facebook’s Q2 2020 advertisement revenue growth from 23 percent to negative 16 percent year-over-year. The analyst now expects a return to normalcy in Q2 2021.
As a refresher, Facebook revealed on the 24th of March that its advertisement business continues to weaken in countries that are taking the most aggressive actions to curtail the spread of the coronavirus.
Even though user engagement across Facebook’s platforms increased, Facebook had said at the time:
"Much of the increased traffic is happening on our messaging services, but we’ve also seen more people using our feed and stories products to get updates from their family and friends ... We don’t monetize many of the services where we’re seeing increased engagement, and we’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19."
These developments are hardly surprising given that a plethora of companies have slashed their marketing budgets in order to curtail expenses in the midst of an aggravating economic slump. Some companies are also hesitant to advertise alongside discussions on the coronavirus – a perennial topic on social media these days – due to the fear of having their brand associated with the pandemic.
Facebook’s stock is down 13.16 percent year to date (based on Monday’s closing price) corresponding to a market capitalization of $510.20 billion. For comparison, the S&P 500 index is down around 13.34 percent while the NASDAQ 100 index is down only 1.64 percent in the same timeframe.