The biggest risk to Facebook Inc (NASDAQ:FB) may be losing its “cool.” According to BMO Capital analyst Dan Salmon in an interview with AdExchanger , “As ads enter the platform or early/younger users start to see their parents and aunts and uncles show up on Facebook, it may not be seen as “cool” anymore and then they move to another social network.”
I know my teenage daughter won’t friend me on Facebook Inc (NASDAQ:FB). She says it’s not personal. Such are the slights of parenthood so I think Salmon is onto something. Facebook is just too much a part of young people’s lives. It’s where they find love and friendship. This 16-34 year old demographic is what advertisers swoon over and Facebook Inc (NASDAQ:FB) needs them to stay engaged.
An entire etiquette cottage industry has grown with Facebook use. Woe to the modern mom who doesn’t tell the kid, “Ask before you post you’re in a relationship with someone.” Or the dad who doesn’t know how to comfort a teenager who’s been defriended. Or the parents who have Ivy League ambitions for Junior or Missy who doesn’t warn that admission officers will check out their Facebook Inc (NASDAQ:FB) page to find it littered with intimate lovey photos instead of posts on their leadership qualities and extra-curriculars and how much they just looove studying.
Facebook and Instagram are their relationship town square, wine bar, what have you to meet people and develop relationships. The trials of NYC dating have been the fodder of magazines, multi season TV shows, and movies for decades but one woman in NYC has been meeting the nicest guys in New York on Instagram.
Lately Facebook Inc (NASDAQ:FB) has been losing Wall Street friends. On February 12 BTIG downgraded it to a Sell with a price target of $22. Analyst Richard Greenfield’s rationale is that Facebook on mobile can’t engage the way it can on desktops and that expectations are just too high.
This came one day after a downgrade from Bernstein Research from Outperform to Market Perform. Carlos Kirjner took his price target down to $27 from $33. He cited limited upside because revenues from Europe and the US would have to grow over 20% to support a higher share price and that Facebook Exchange is not taking off as fast as it should. Jefferies also downgraded on Jan. 31.
The downgrades have taken Facebook stock down more than 10% in the first two weeks of February after an upbeat January earnings release had given the name a little Wall Street like.
Despite these recent downgrades Facebook isn’t going away. A news release from Pew Research concluded from a random poll that 61% of Facebook users take an intentional break from the service, but the media seemed to have missed the point of the survey that these same users came back and these weren’t permanent defections.
In early January several large firms upgraded the stock including BMO Capital Markets (the aforementioned Dan Salmon), Morgan Stanley, William Blair and JPMorgan. On Jan. 31, the same day as the Jefferies downgrade Cantor Fitzgerald issued a new price target of $35 from $33 and maintains its Buy rating.
In an exchange about Exchange for Adweek, Facebook’s global sales chief Carolyn Everson gushed that Facebook’s Exchange was outperforming rival Google Inc (NASDAQ:GOOG) with its direct response ads. Exchange seems to be the big issue with some of the latest downgrading analysts.