GDPR Isn't Stopping Facebook, Inc. (FB) Stock
This week was a huge week for Facebook, Inc. (Nasdaq: FB), as CEO Mark Zuckerberg fielded tough questions in front of the European Parliament ahead of Friday's implementation of the General Data Protection Regulation. Facebook has survived an onslaught of negative media headlines, political pressures and regulatory hurdles so far in 2018, and analysts say the company has navigated the minefield relatively well so far.
The GDPR is a new set of online data protection rules in Europe. The rules require online advertising companies like Facebook to obtain user consent before collecting personal data or using it for targeted advertising.
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This week, Zuckerberg testified in front of European regulators and answered tough questions related to Facebook's user privacy measures and its highly-publicized scandal that resulted in Cambridge Analytica gaining unauthorized access to the personal data of millions of Facebook users.
According to GBH Insights head of technology research Daniel Ives, Zuckerberg performed well during the grilling.
"Facebook reiterated it will be fully compliant with GDPR on May 25, with a lion's share of the focus during the hearings on complying with this game changing data privacy regulation and steps Facebook is taking going forward to guard against another Cambridge-like situation," Ives says.
Fortunately for Facebook investors, GDPR fears and negative Cambridge headlines haven't had a meaningful impact on Facebook's ad business or user engagement. In its most recent quarter, Facebook reported big earnings and revenue beats, and the stock is up more than 5 percent in 2018.
Despite all of the negative media coverage, a GBH Insights survey of Facebook users revealed that the majority of them are unaware of the Cambridge Analytica scandal. In addition, relatively few of those that are concerned about Cambridge Analytica are actually reducing their activity on the platform.
"In a nutshell, so far the fundamental damage to the Facebook platform has been very contained, in our opinion, and is better than feared, which is a relief for the Street," Ives says.
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While the months leading up to the GDPR implementation may have been the most difficult stretch for Facebook and its stock, Ives says the possibility of additional regulations in the U.S. and abroad means Facebook is not out of the woods just yet.
GBH Insights has a "highly attractive" rating and $225 price target for FB stock.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
