Facebook shares downgraded, stock falls over 2%

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  • Mass shooting live stream raises concerns
  • Analyst downgrades stock
  • Executive exodus continues

Facebook faces two big challenges as more executive departures and difficulties in policing disturbing content raise investor concerns.

Last week, Product Chief Chris Cox announced he was departing from Facebook, along with WhatsApp Head Chris Daniels. The social network’s problems with footage from the mass shooting in New Zealand last week is also an issue, according to Needham and Co.

Needham and Co. Analyst Laura Martin downgraded Facebook from Buy to Hold, writing in a note to investors on Monday morning: “Silicon Valley is a competitive place for top talent and losing these senior executives from FB may cause them to land at a company that competes with FB.”

Subsequently, shares in the company dropped 2.67% to $161.55. However, they remain up 24% this year.

Martin believes that more high-profile departures could be in the pipeline following the company’s failure to quickly deal with the issue of the worrying live streaming of the mass shooting at a New Zealand mosque.

Martin placed “horrific images uploaded to FB (like the recent New Zealand events) that are technologically difficult to block at the 100% level and which hurt FB’s brand” at the top of her list of concerns facing the company.

“Together, we believe these risks are causing a Negative Network Effect, as evidenced by senior management departures,” she said. 

The Network Effect refers to the concept of each employee who has a particular belief contributing to another one adopting the same view. If Cox and Daniels have left the company due to disagreements over broad strategy, this may mean that others agree with them and will follow.Even though she downgraded the stock, Martin left the price target steady at $169, which is around 4% higher than the stock’s current level.

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