Coverage: Facebook loses $40 billion in market value

Social media company Facebook Inc. saw $40 billion in market capitalization wiped away on Monday after it was disclosed that the company allowed Cambridge Analytica, a data firm that helped the Trump campaign, to access data on users without their express permission and hold that data for years despite saying that it had destroyed those records.

Mark DeCambre and Emily Bary of MarketWatch.com had the news:

Monday’s rout has wiped away almost $40 billion in market value from Friday’s close of $537.67 billion. The stock closed right at its 200-day moving average, a closely watched trend tracker that currently extends to $172.54, according to FactSet.

Many analysts acknowledged that the latest episode represents a public relations and regulatory risk to Facebook, though they were divided on the company’s ability to weather such challenges.

“It appears that data access by the original app developer was properly permissioned (i.e., this was not a ‘breach’ per se) and we note that Facebook has since upgraded its user privacy functionality and app review process to prevent similar abuse,” wrote Wells Fargo analysts led by Peter Stabler. “Nonetheless, this episode appears likely to create another and potentially more serious public relations ‘black eye’ for the company and could lead to additional regulatory scrutiny.”

Wells Fargo has a buy rating on the stock and a $230 price target.

Hanna Kozlowska of Quartz reported that Facebook’s stock faces headwinds:

Analysts and observers are divided over the company’s future, with some more optimistic than others. Daniel Ives, an analyst at GBH, said in a note to investors that with more pressure from Washington, “modest changes to their business model around advertising and news feeds/content could be in store over the next 12 to 18 months.”

While the threat of regulation will be concerning to investors, Ives called it more of a “headline risk” that will dominate the news cycle for now, rather than a long-term game-changer, and added that he was not worried that the company’s “advertising fortress” is at risk.

Conversely, Stephen Guilfoyle at The Street advises investors not to buy on Facebook’s dipping price, warning that it might take a while for Facebook’s stock to swing back up.

Before the Cambridge Analytica news broke, market research firm eMarketer put out analysis that predicted that Facebook’s (and Google’s) share in the digital ad market in the US will be slightly falling in the next several years.

Rhett Jones of Gizmodo strikes a more ominous tone for the company:

It’s true that Facebook has previously weathered similar storms by either outright denying any issues exist or promising to just keep tweaking that algorithm and rolling out new terms of service. But this time feels a bit different.

Lawmakers around the world have vocally called for regulations, hearings, and investigations into this incident over the last few days and more continue to chime in. New Jersey Rep. Frank Pallone insisted on Monday that “the Energy and Commerce Committee must hold hearings soon.” That follows Minnesota Sen. Amy Klobucher’s demand that Mark Zuckerberg appear to testify before the Senate Judiciary Committee and Oregon Sen. Ron Wyden grilling him with questions.

On top of that, experts say that this case could easily be determined as a violation of the FTC’s consent decree that resolved a previous privacy case in 2011. If FTC investigators decided to throw the book at Facebook, they could potentially levy “trillions of dollars” worth of fines against the company.