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- Facebook on Monday got an upgrade from Nomura Instinet, rising to its highest level since August.
- Last year, worries over the social-media giant’s privacy issues put its stock value and user metrics under pressure.
- Shares tanked as much as 44% from their July high as the company’s stalling user trends weighed.
- The story started to change in late January, when Facebook reported that 26% of all humans on planet earth use a Facebook property every day.
- Watch Facebook trade live.
Facebook jumped as much as 2.7% to $174.25 a share Monday — marking its highest level since August — after Nomura Instinet upgraded its rating to "buy" and raised its price target by 25% to $215, just shy of its record high of $218.92 set in late July.
"Our concerns over engagement trends at core Facebook have eased," analyst Mark Kelley said in a note out Monday, adding that the company’s core user trends are better than he expected and that he sees upside to margins throughout the year.
Last year, worries over the social-media giant’s privacy issues put its stock value and user metrics under pressure. In March of 2018, Facebook was linked to the Cambridge Analytica data scandal surrounding the 2016 presidential election, causing it to shed $50 billion of market value in two days.
The stock recovered, but then plunged more than 20% when after Facebook on July 25 reported lower-than-expected active users and said that its top-line growth rates would decline by "high single-digit" percentages in the coming quarter as it ramped up its self-declared war on safety and security.
Shares continued to slide, tanking as much as 44% from their July high as the company’s stalling user trends weighed. From the first quarter to the third quarter of last year, its daily average users in the US and Canada flatlined at 185 million.
And the story started to change in late January, when Facebook’s reported fourth-quarter earnings crushed Wall Street estimates. The company said its family of services – including Facebook, WhatsApp, Instagram, and Messenger – now have around more than 2 billion daily active users and over 2.7 billion monthly active users, meaning that 26% of all humans on planet earth use a Facebook property every day. Facebook shares have since gained 20%.
"4Q18 results showed a slight improvement in the DAU/MAU ratio in the U.S. (77% from a dip to 76% in 3Q18), indicating that engagement is intact," Kelley said. "That engagement could improve as the company looks to focus on encrypted and ephemeral messaging across properties, in addition to the current core functionality."
Kelley added that regulation is likely to make Facebook stronger.
He said: "We continue to believe that increased regulation will be a net positive for large platforms like FB, though there could be some headline risk in the near-to-medium term. On the whole, we do think the negative headline headwinds have largely been exhausted, with little reaction to negative press as of late."
Facebook was up 30% this year.
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