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Here's Why This Analyst Downgraded Facebook to a Sell Rating
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On Monday, shares of tech giant Facebook Inc. are sliding, down about 1.3% to $170.18 per share in morning trading after an analyst at a small research firm downgraded the stock to a Sell rating from a Hold.
Analyst Brian Wieser is part of Pivotal Research, an equity research company based in New York City. The decision to lower its rating on Facebook comes just days after the social media company reported a massive earnings beat and monthly active user count of 2 billion. Weiser believes that because large companies are “scrutinizing” their marketing budgets, Facebook is facing the risk of digital ad saturation.
"We think that the market is looking at upside potential without appropriately considering risks to growth," Wieser wrote in a note to clients Friday. "With every passing year, digital advertising is closer to a point where the market is saturated."
He went on to say that large company advertisers represent 30% of Facebook’s sales, pointing out how Procter & Gamble (PG - Free Report) recently cut $140 million from its digital ad budget and said it had no impact on its revenue.
The consumer staple giant’s "statement will undoubtedly add fuel to the fire of large brands more carefully scrutinizing their digital advertising choices," he wrote. "There are limits to growth to spending on advertising, as marketers are mostly unable to tap into broader and generally segregated marketing budgets."
Along with lowering his rating, Wieser reaffirmed his year-end price-target of $140 for Facebook, which represents a 19% downside from Friday’s close.
Wieser also cut his rating for Facebook stock back in February, lowering it to a Hold from a Buy. CNBC notes that there is only one other Wall Street analyst out of 40 that has either a Sell or Underweight rating on Facebook.
FB is currently a #2 (Buy) on the Zacks Rank, and shares of the company have gained over 47% year-to-date.
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Here's Why This Analyst Downgraded Facebook to a Sell Rating
On Monday, shares of tech giant Facebook Inc. are sliding, down about 1.3% to $170.18 per share in morning trading after an analyst at a small research firm downgraded the stock to a Sell rating from a Hold.
Analyst Brian Wieser is part of Pivotal Research, an equity research company based in New York City. The decision to lower its rating on Facebook comes just days after the social media company reported a massive earnings beat and monthly active user count of 2 billion. Weiser believes that because large companies are “scrutinizing” their marketing budgets, Facebook is facing the risk of digital ad saturation.
"We think that the market is looking at upside potential without appropriately considering risks to growth," Wieser wrote in a note to clients Friday. "With every passing year, digital advertising is closer to a point where the market is saturated."
He went on to say that large company advertisers represent 30% of Facebook’s sales, pointing out how Procter & Gamble (PG - Free Report) recently cut $140 million from its digital ad budget and said it had no impact on its revenue.
The consumer staple giant’s "statement will undoubtedly add fuel to the fire of large brands more carefully scrutinizing their digital advertising choices," he wrote. "There are limits to growth to spending on advertising, as marketers are mostly unable to tap into broader and generally segregated marketing budgets."
Along with lowering his rating, Wieser reaffirmed his year-end price-target of $140 for Facebook, which represents a 19% downside from Friday’s close.
Wieser also cut his rating for Facebook stock back in February, lowering it to a Hold from a Buy. CNBC notes that there is only one other Wall Street analyst out of 40 that has either a Sell or Underweight rating on Facebook.
FB is currently a #2 (Buy) on the Zacks Rank, and shares of the company have gained over 47% year-to-date.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9x stock explosion after they launched their iPhone in 2007? Now, 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade, which could, in turn, save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>