Facebook Inc. (Nasdaq: FB) investors have had to deal with plenty of negative headlines following the Cambridge Analytica data scandal last month. The latest round of advertiser checks suggest Facebook’s core business is weathering the media storm fairly well.
Facebook stock traded lower by another 1.9 percent Wednesday morning after Facebook confirmed that CEO Mark Zuckerberg would testify before Congress and answer questions pertaining to Cambridge Analytica on April 11. Zuckerberg’s testimony will likely be difficult, and members of Congress will not pull any punches, leaving the door open for another wave of negative headlines and sound bites next week.
The obvious fear for Facebook investors is that the negative press coverage and potential regulatory crackdown from Washington could eventually drive Facebook’s users and advertisers away from the platform.
[See: 6 Things to Know About Mark Zuckerberg’s Manifesto.]
According to Morgan Stanley analyst Brian Nowak, Facebook’s top advertisers seem to be sticking with the company. Nowak recently spoke with eight top Facebook advertisers and says he didn’t get the sense that any were materially reducing their Facebook business.
In addition, Nowak says Facebook’s decision to end partnerships with third-party data providers was a smart long-term move. In the past, third-party data providers, such as Acxiom Corp. ( ACXM) and Datalogic, have helped Facebook improve its ad targeting, performance and pricing.
“Over the long term, we think the elimination of third parties is smart strategically as it will highlight FB’s leading reach and first-party data advantage,” Nowak says.
While it may seem as if Facebook is voluntarily putting itself at a disadvantage compared to companies like Twitter ( TWTR) and Snap ( SNAP), Nowak says Facebook is simply protecting itself from third-party risk. Nowak also says he wouldn’t be surprised to see Twitter, Snap and others follow Facebook’s lead in shunning third-party data.
Despite his mostly positive take on the current state of Facebook’s advertising business, Nowak says it would be unwise to assume Facebook’s ad revenue was entirely unscathed by the Cambridge Analytica drama.
[See: 10 of the Best Tech ETFs to Own.]
“While agency conversations are positive, our sample is far from statistically significant, so we are taking a more conservative near-term stance and reducing ’18-’19 ad revenue by 2 percent [to] 3 percent,” Nowak says.
Morgan Stanley has an “overweight” rating and $200 price target for FB stock.
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Advertisers Are Sticking With Facebook, Inc. (FB) originally appeared on usnews.com
