It looks like Mark Zuckerberg has decided maybe it would be a good idea to say something in light of the fact that Facebook is under fire from all sides and considering that about a half dozen Congressional committees are further up his ass than David Dennison is up Putin’s.
“We’re told that Zuckerberg was initially more focused on how to fix the problems than on what to say, but that left a vacuum that provoked merciless coverage, increased lawmakers’ suspicions, and even left some employees demoralized,” Axios writes early Wednesday morning in what they’re calling a “scoop.”
That “scoop” is basically that Mark is going to prove to the world that he isn’t a mute (something he has to remind everyone on occasion).
“The coverage, like the stock drop, is brutal: A USA Today headline calls the Cambridge Analytica crisis a ‘catastrophic moment’ for Facebook [while] an online N.Y. Times opinion piece is headlined, ‘Facebook’s Surveillance Machine’,” Axios continues, in case you needed to be reminded that this is like, really bad, guys.
Axios says they’re “told that Zuckerberg’s remarks will be aimed at rebuilding trust, and that he wanted to say something meaningful rather than just rushing out.”
Yes, “he wanted to say something meaningful rather than just rushing out”, although I don’t know why. After all, no one is going to believe anything he says anyway even if it’s sincere and true. And while I’m sure it will be some semblance of the former (after all, losing $8.5 billion in 48 hours has a way of making one pretty goddamn sincere), it probably won’t be very much of the latter because as Axios also reminds you “a problem is that Facebook has long known about these vulnerabilities.”
In any event, analyst opinions vary. For her part, Height Capital’s Stefanie Miller is going so far as to suggest that “pressure from federal lawmakers may be the precipitating event that turns investors away from these companies” while Nomura said on Tuesday that the “data bubble” may be bursting.
JPMorgan is marginally bullish after the fall. “Clarity on the Cambridge Analytica issue and Facebook’s willingness to self-regulate may position the stock for a recovery into 1Q earnings after a lack of information led investors to price in a dire liability and regulatory scenario,” the bank writes, in a new note, before adding that “the willingness for FB to present in front of a Judicial Committee may imply the company believes it may have enough information to provide a detailed account of what information may have been disseminated, how the misuse occurred, how liable FB may be, and what, if any, potential regulatory backstops could have avoided the misuse/disclosure of customer data.” That’s from JPM’s Shawn Quigg. The bank’s Doug Anmuth says maybe this is a buying opportunity because according to Doug, there’s no business impact currently and Q1 engagement trends should improve quarter on quarter, while advertisers are not moving spending away.
Meanwhile Barclays says they’re “waiting a bit longer for the dust to settle.” To wit:
2018 is turning out to be a challenging period for advertising-driven business models in mega cap internet, namely FB and GOOGL, who each face regulatory issues and have had to push back against a “bad-for-society” narrative. We expect continued “tape-bombs” for Facebook are possible as the current negative news flow evolves.
Watching “DeleteFacebook” – When The Narrative Becomes Reality — The biggest issue we see for Facebook is if the DeleteFacebook leads to user attrition and eventually ad dollars allocated elsewhere. We’ve seen internet companies where the negative narrative becomes reality and smart people start leaving the company and many KPIs erode (one could point to Twitter in 2012-2016 as an example). The question we often ask ourselves during these turbulent times is just how much of a must-have utility is Facebook? If it provides enough utility to users that they won’t care about the data leakage and the “bad-for-society” debate, then the stock is a buy here. If the utility nature of the service is well below Amazon and Google, and users will go elsewhere when problems arise (which we’ve always seen as a key risk), then we could see risk from the narrative becoming reality.
And then here’s Keybanc who recommends buying on weakness:
[There could be] advertiser hesitancy, reduced engagement, increased expenses, formal regulation, operational distraction and impacts to hiring [but] the magnitude of risk to Facebook’s long-term cash generation seems likely to be modest in each case.
Whatever the case, this is going to continue to weigh on tech sentiment. Whether that translates to more losses or not of course depends on how insulated the rest of the sector turns out to be from Mark’s trials and tribulations and also on whether Jerome Powell gives everyong a reason to be worried later on Wednesday.
