Facebook (FB) was hit by a double whammy of antitrust lawsuits on Wednesday. The Federal Trade Commission (FTC) and a parallel coalition of 48 states are suing the social media giant on the grounds of its alleged anticompetitive behavior intended to stifle any rising competition.
The suits’ ire is mostly directed toward the acquisition of Instagram and WhatsApp and could result in the divestiture of the two ancillary apps.
However, Baird analyst Colin Sebastian is having none of it.
“While we believe that oversight over big tech is warranted, we do not see much in the way of “teeth” in [the] FTC/states complaint about Facebook; and we see very little likelihood that punitive recommendations to split the company will occur,” the 5-star analyst said.
The analyst has a list of retorts to the accusations. Addressing the allegation Facebook engages in a “systematic strategy to eliminate threats to its monopoly,” Sebastian says that at the time of the Instagram acquisition, the app wasn’t considered a ”big threat,” and it is only due to Facebook’s leadership that it has turned out to be such a success. Ditto with WhatsApp, of which Baird claims the allegation amounts to “revisionist history.”
“Messaging wasn’t considered an overlap with social networking at the time,” Sebastian added.
Sebastian also calls the FTC’s allegation that Facebook’s “actions to entrench and maintain its monopoly deny consumers the benefits of competition,” as “absurd.”
“Monopoly means they are the exclusive provider of a service,” says Sebastian. “Clearly, they are not.”
Overall, the analyst doesn’t think the courts are going to buy into the calls for Facebook to separate from its prized assets, claiming they are too “largely integrated on the back end,” and have been primed for success on account of Facebook’s “technology and innovation.”
What’s more, TikTok, Snap, Twitter, Pinterest, are all evidence of “intense competition.”
So, down to the real issue, what should investors do in the meantime?
“We recommend buying Facebook on pullbacks given ongoing healthy digital advertising trends and easing growth comps in the year ahead,” the Baird analyst concluded.
Overall, Sebastian rates FB shares an Outperform alongside a $310 price target. This figure implies a 13% upside from current levels. (To watch Sebastian’s track record, click here)
Sebastian is certainly no lone Facebook bull; 32 other analysts currently rate the stock a Buy, while the 2 additional Holds can’t detract from a Strong Buy consensus rating. At $324.69, the average price target suggests gains of 19% could be in the cards over the next 12 months. (See FB stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
