Facebook Inc (NASDAQ:FB) has been unfriended by analysts as the stock fell 20% right after the opening bell, wiping a hefty US$100bn off its market value and sparking concern over the social network's future growth potential.
After missing estimates for second-quarter revenue and the fallout from a user-data breach scandal, the company provided a bleak outlook for user growth late Wednesday, prompting a sell-off that continued into the morning session.
Chief Executive and co-founder Mark Zuckerberg added fuel to the fire with a disastrous conference call in which he warned that an investment in security would impact profitability. He added that revenue growth would slow year over year in the second half of 2018.
Analysts reacted swiftly to the change in fortune for the social media behemoth, as many lowered their price targets.
Analysts at Oppenheimer decreased their target to $200 from $225 and maintained their Outperform rating citing a "self-inflicted revenue slowdown, combined with higher costs to protect platform." However, they said valuation "remains reasonable."
"As users upload more personal information, this increases Facebook’s competitive position. With the fragmentation of media and communication, we believe consumers will increasingly find media and information through their social graph, positioning FB in the middle of this information exchange," wrote Oppenheimer analysts Jason Helfstein, Alec Brondolo and Jed Kelly.
"Valuation for high-quality tech asset appears compelling at 20x P/E; as such, we maintain our Outperform rating," they added.
Wells Fargo analyst Ken Sena lowered his price target to US$220 from US$250 after the company's Q2 results missed Street estimates for the first time in 12 quarters, according to TheFly.com.
JP Morgan analyst Doug Anmuth removed Facebook from the firm's Analyst Focus List and cut his price target to US$205 from US$242, TheFly reported.
Piper Jaffray's Michael Olson joined the crowd and lowered his price target to US$200 from US$250.
Brian Nowak lowered Morgan Stanley's full-year 2019 and 2020 EBITDA estimates by 8% and 9%, respectively.
And Goldman Sachs dropped its price target to US$205 from US$225, according to TheFly.
Getting some 'Likes'
But Wedbush analyst Michael Pachter wrote in a note to clients: “Q2 results generally underwhelmed relative to our expectations, and updated FY:18 guidance was more pessimistic than the Street had expected. Revenue was US$13,231 million, versus our estimate of $13,588 million, and the consensus estimate of US$13,364 million.”
Pachter reiterated a Buy rating with a target of US$250 as the company is still growing users and its other products are still seeing dramatic growth.
Citi analyst Mark May wrote in a note that while Facebook's guidance is disappointing, the valuation at current share levels is too attractive to downgrade his Buy rating. He did lower his price target to US$210 from US$220 but kept a Buy rating, according to TheFly.
Jefferies analyst Brent Thill still has faith in Facebook. He said that the controversies could provide a great buying opportunity, TheFLy reported. He reiterated a Buy rating but with a lowered price target of US$220, down from US$240.
The stock recovered slightly in morning trading, but was down double-digits in midday trade by 19.09% to US$175.95.
-- (Updates with Oppenheimer lowering price target, fresh quotes) --
Written by Belinda Robinson for Proactive Investors