An equity analyst at a lesser-known US-based research firm has downgraded the rating on Facebook shares to ‘sell’ from ‘hold’ against broad consensus, even after his previous call on the social media giant’s shares went horribly wrong. Brian Wieser of Pivotal Research has cut his recommendation on Facebook shares to ‘sell’ over valuation due to the over 24% rally since his last ‘hold’ call in February, despite the company posting a stellar quarterly results last week. Brian Weiser has kept the year-end price target same at $140, which implies a 19% downside to Facebook shares from Friday’s close.
Brian Weiser cited risks from saturation in digital advertising, low view-ability, regulatory concerns and political macro uncertainty for the company, which he said have so far gone unnoticed. The analyst at Pivotal Research said that the large companies are scrutinising their marketing budgets. “We think that the market is looking at upside potential without appropriately considering risks to growth,” Brian Weiser wrote in a note to the clients last week. “With every passing year, digital advertising is closer to a point where the market is saturated,” he added.
Facebook shares ended Friday at $172.5. It has risen almost 50% so far in this year 2017. But Brian Weiser seems not too convinced, though. “You have increasing problems with view-ability that marketers were mostly not aware of at all last year,” he said in an interview with CNBC TV, adding, “I don’t think most large marketers are aware of this.” He said while Facebook might continue to grow its business, the stock is too expensive for now. Brian Weiser said that large company advertisers, who contribute about 30% to Facebook’s sales, could realise that they don’t lose much even after cutting their digital ad spends.
CNBC said in a report citing data from FactSet that Brian Weiser’s ‘sell’ call on Facebook is a rare occurrence, with only one other analyst having a ‘sell’ or ‘underweight’ recommendation on it, out of the 40 who have coverage on the stock.