Facebook Inc (NASDAQ:FB) and FB stock investors face what may be a crossroads, as some analysts remain bullish on the stock while one analyst predicts a fall by as much as 30%. FB stock has had a solid 2016, gaining 13% year-to-date.
FB stock recently fell 5.5%, despite an excellent Q3 report, mainly due to the belief that ad sales, which were a large part of the of the 56% revenue growth over the same period last year, were going to slow in the next quarter. This came after Facebook CFO David Wehner said as much during a conference call, believing that Facebook has reached its ad limit per page, and will explore other avenues of revenue.
Some analysts see this as the beginning of a steep drop for FB stock. How steep?
Trip Chowdhry, managing director of equity research at Global Equities Research, LLC, said he believes that the stock could fall as much as 30%. “If you think about this quarter, it’s as good as it can get because two major events happened in a single quarter. You have U.S. elections and the Olympics. This is not going to repeat for the next four years,” said Chowdhry. (Source: “Facebook shares to fall 30% as blowout quarter ‘as good as it gets’: Analyst,” CNBC, November 3, 2016.)
Chowdhry went on to call those who are bullish on FB stock as “selling a dream.” That’s quite a dire warning against the stock, and rather contrarian.
Many analysts remain bullish on FB stock, including at least one of our own at Profit Confidential, who called the current $120.00 price an “opportunity.”
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CNBC went on to interview several analysts who remain bullish on FB stock. Reuters reported that some analysts are liking the stock at this price as well, calling the stock a good long-term bet. (Source: “Drop in Facebook’s stock makes for good time to connect: analysts,” Reuters, November 3, 2016.)
Of 49 brokerages covering Facebook stock, 45 have given it a “buy” or higher rating. Several analysts have also noted that Facebook’s warning about slowing ad load revenue was nothing new, and that Wehner has pointed this out in previous quarterly reports.
While there seems to be more analysts on the bullish side versus the bearish, at the same time, the risk of a 30% decline might be enough to keep some investors away.