Facebook Stock Gets Downgraded on Consumer Trust Concerns

Stifel is taking a step back from its bullish Facebook stance, on fears that deteriorating employee and consumer morale will hurt the company’s finances.

The firm’s analyst Scott Devitt lowered his rating to Hold from Buy for Facebook stock, citing weakening consumer survey results for its services.

The change makes Stifel one of the few firms without a positive rating on the company. Nearly 80% of the 49 Wall Street firms that cover Facebook stock have a Buy rating on the social media company, according to FactSet.

The downgrade comes as the social media giant is under increased scrutiny for its practices. Nearly 250 pages of confidential internal Facebook emails published Wednesday showed the company considered payments for user data and attempts to kneecap “strategic competitors.”

“Facebook’s management team has created too many adversaries-politicians/regulators, tech leaders, consumers, and employees-to not experience long-term negative ramifications on its business,” Devitt wrote Wednesday. “We updated our previous SurveyMonkey survey of Facebook users (the blue app, ~80% of revenue) and the results continue to suggest displeasure and distrust of the platform.”

Devitt reaffirmed his $150 price forecast for Facebook stock.

Facebook shares were down 2.3% to $134.76 on Thursday. Its stock has slid more than 20% this year as the Cambridge Analytica data-privacy scandal has continued to reverberate. In July, Facebook’s stock price dropped significantly after it projected reduced long-term profitability because of increased security and content-review expenses.

Devitt said Stifel’s survey of 1,000 consumers revealed 79% of respondents believe Facebook’s impact on society is either neutral or negative and 71% don’t trust the company. He also cited a recent survey of Facebook employees, which showed decreasing optimism over its future.

“While there doesn’t appear to be material downside to FB shares, we don’t find the upside as compelling as other companies under coverage,” he wrote.

Write to Tae Kim at tae.kim@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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