Facebook: Still A Buy After Recent Whistleblower & Outage Pressures

(Preview) Company Update (FB US) (Buy)

Summary

• Facebook stock has fallen 13% since August after a series of bad news, but we believe the long-term investment case is intact.

• Whistleblower Frances Haugen alleged that Facebook knowingly harms teenagers' mental health and politics and is losing young users.

• However, even her leaked documents show Instagram's strength with young users, and the remedies to her other claims are manageable.

• Apple's anti-tracking changes are a risk, but we believe Facebook's scale and technology will allow it to continue adapting and growing.

• With shares at $330.05, we expect an exit price of $560 and a total return of 70% (17.8% annualized) by 2024 year-end. Buy.

Introduction

We review our Facebook investment case after shares fell 13.0% since the end of August, following a series of high-profile negative news stories.

We initiated our Buy rating on Facebook in May 2019. Even after the recent correction, FB stock has gained 92.7%, including 20.8% year-to-date.

We believe that, while some of the adverse pu…