Please ensure Javascript is enabled for purposes of website accessibility

Can Facebook Stock Bounce Back After Last Week's 14% Drop?

By Rick Munarriz - Mar 25, 2018 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Most Wall Street pros see the drop as an opportunity, but the #deletefacebook threat looms large.

It's fair to say that Facebook (META -0.76%) has gotten itself into a bit of a pickle. A growing number of users and investors are turning on the social-networking giant after data security concerns surfaced. An expose on Cambridge Analytica's tactics in potentially helping sway the 2016 presidential elections claimed that the data-analytics firm gained access to about 50 million Facebook profiles by taking advantage of Facebook's data-sharing features. It didn't help matters when a former platform operations manager responsible for policing data breaches by third-party developers claimed that profile harvesting was common when he was there between 2011 and 2012. 

The stock suffered its biggest one-day decline since 2012 following the news, and when Facebook finally did respond, it failed to woo investors back. Facebook apologized for not doing a better job of protecting user data at the time, but it also pointed out how it's been improving on that front and will be making additional changes.

There's no denying that Facebook will beef up its defenses when it comes to third-party data extraction, but have consumers had enough? Online users can be fickle. The stock tumbled 13.9% for the week. 

Facebook HQ sign, decorated for 2015's Pride Day.

Image source: Facebook.

A hashtag by any other name

Facebook's brand is coming under fire, and the stock is now trading more than 18% below the all-time high it hit last month. A #deletefacebook hashtag has caught on, and the heat began to rise even more when Elon Musk and WhatsApp's co-founder got into the platform bashing: 


Wall Street, for the most part, sided with Facebook. Most analysts think the sell-off presents a buying opportunity. 

Sam Kemp at Piper thinks the saber-rattling will pass. He recognizes that the dot-com behemoth could've done a better job of securing user data, but he thinks the long-term relevance of the scandal will be minimal. He is sticking to his overweight rating and $210 price target.

Ken Sena at Wells Fargo thinks CEO Mark Zuckerberg's response, criticized by some as coming too late, was reasonable. He believes the mandate to ensure user privacy is genuine and sees it as a constructive first step for Facebook. He's also sticking to his bullish outperform market call on the stock.

Not every analyst was offering a thumbs-up, though. Scott Devitt at Stifel slashed his price target from $195 to $168, arguing that the data issues are significant and that businesses built on trust have a hard time winning that trust back once it's squandered. 

It's too early to know if the events over the past week will haunt Facebook materially in the near future. If advertisers freak out or users follow through on the #deletefacebook threat, there will be a near-term hiccup. Facebook's saving grace is that there's no one close to it as a social network in terms of breadth of users. Folks go where the people are, and for now the networking effect is still in Facebook's corner.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$160.03 (-0.76%) $-1.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.