Pivotal's Brian Wieser: Facebook 'Not As In Control Of Its Business As It Needs To Be'

Revelations of a major hack catalyzed a dip in Facebook, Inc. (NASDAQ: FB) shares in recent weeks. With new issues surfacing at the social media company, one sell-side analyst sees symptoms of “systemic issues.”

The Analyst 

Pivotal Research Group analyst Brian Wieser maintained a Sell rating on Facebook with a $131 price target.

The Thesis

Over the last week, Facebook was tied to the following negative stories, Wieser said in a Wednesday note. (See his track record here.)

• Fresh association with a Russian-linked data-scraper;
• Implication in Myanmar’s ethnic cleansing as a distributor of abusive and inflammatory posts most recently discovered on a military-linked page; and
• Accusations of fraud over deceptive video ad metrics.

The emergence of new problems reinforces Wieser’s bearishness.

“The underlying problem that we see is that the company has been so focused on growth at any cost that it has failed to sufficiently invest in processes that might anticipate problems, acknowledge problems fast enough or fix problems fast enough,” the analyst said. “We’re not doubting they can’t be fixed, but the fact that problems keep emerging reinforces our view that the company is not as in control of its business as it needs to be.”

Wieser anticipates increasing costs associated with solutions and said further problems may yield “more material commercial consequences.”

While Pivotal is concerned about Facebook's costly issues, the analyst said the Sell thesis largely reflects limited growth in digital advertising.

Price Action

Facebook shares were trading up slightly at $158.87 at the time of publication Wednesday. 

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