Two analysts warned today that the social network giant could fail to live up to Wall Street’s financial expectations — which contributed to a 2.4% drop in the share price. It closed at $20.40, which is down 8.4% over the last four days. BTIG’s Richard Greenfield downgraded shares to “sell” from “neutral” with a $16 price target. He warned that Facebook’s effort to include ads and other services designed to generate sales could backfire. They’re cluttering people’s news feeds with ads that are “relatively generic…with very little targeting and with a very low bar in terms of the level of creativity Facebook requires,” Greenfield says. “To make matters worse, we increasingly see brands violating Facebook’s social mission by deceptively trying to acquire Likes, so they can target you and all your friends going forward.”
Meanwhile, Pivotal Research Group’s Brian Wieser — who has a “buy” on the stock — lowered his target price to $28 from $32 over concerns that Facebook could suffer from the new disclosures of weakness at game maker Zynga. He had forecast that Facebook would see about $5B in 2017 from non-advertising sources including Zynga games such as FarmVille and CityVille. But Wieser just reduced that projection to $3.4B. What’s more, he says, if Facebook’s Q3 revenues don’t beat Wall Street expectations then “we see enhanced short-term risk.” Many shareholders “may now be more likely to fear for the worst given the broader disaster at Zynga (where by now that stock’s value has collapsed to barely more than the cash on its balance sheet) and sell more [Facebook] shares than they otherwise would have.”
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