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Facebook Stock Rises; JPMorgan Says Buy on the Pullback

Facebook has weathered negative news in the past, a JPMorgan analyst says, as he advises investors to buy on the pullback.

Facebook  (FB) - Get Facebook, Inc. Class A Report has been through hard times before, a prominent JPMorgan analyst said on Thursday, as he reiterated his overweight rating of the social media giant.

Analyst Doug Anmuth advised investors to buy on the pullback brought on by this week's outage and damning accusations from a former employee.

Shares of the Menlo Park, Calif., company at last check were up 1.5% to $338.73.

Anmuth, who has a $450 price target on the stock, said in a research note that "Facebook’s virtual ownership of the social graph, strong competitive moat, and focus on the user experience position it to become an enduring blue-chip company built for the long term."

"Facebook is in rarefied air across the combination of scale, growth, and profitability, as the company’s massive reach and engagement continue to drive network effects, and its targeting abilities provide significant value to advertisers," he said.

Anmuth said that Facebook's shares are up 22% in 2021 to date but are down 13% from recent highs "on considerable negative news flow." 

The negative news flow included whistleblower Frances Haugen, who leveled serious allegations against the social-media company, on Sunday on CBS's "60 Minutes" and on Tuesday before Congress.

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Haugen, who was hired as a product manager on the civic misinformation team in 2019, said "Facebook’s products harm children, stoke division, weaken our democracy, and much more."

She said internal documents show algorithms put in place by Facebook amplify divisive content to keep users engaged.  

Chief Executive Mark Zuckerberg defended his company's policies, saying "the argument that we deliberately push content that makes people angry for profit is deeply illogical.

The tough period continued on Tuesday when the company's apps -- Facebook, Instagram, and WhatsApp -- went offline for six hours.

Anmuth said "the negative reports create headline risk for FB," but he recommended buying shares on the pullback.

The negative news flow has been seen before and Facebook itself continues to call for regulation, "though we do no expect that near term," he said.

"It is possible, however, that FB could continue to tweak its algorithms to improve the platform, as it did a few years ago in shifting more toward friends & family."