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Facebook Facing Fine Over Unconsented Israeli Acquisitions?

Israel’s antitrust regulator has Facebook (FB) in its crosshairs on matters related to the social media giant’s acquisition practices.

The Israeli Competition Authority (ICA) accuses Facebook of purchasing two Israeli startups without its consent, which is required by laws regulating economic competition in the country. As a result, the authority is considering hitting Facebook with a fine of about $1.8 million.

However, Facebook will have the space to defend itself before the ICA fine can take effect. The company has to act within 60 days.

The acquisitions at the center of the antitrust issue are RedKix, which Facebook bought in 2018, and Servicefriend, which it bought in 2019. RedKix offers team chat services designed for workplaces while Servicefriend makes chatbots for customer service.

The amount Facebook spent on the acquisitions remains unclear.

The ICA revealed that Facebook controls more than 50% of Israel’s social media market. As a result, it considers the company a monopoly. Therefore, the authority said Facebook is required by competition laws to seek the antitrust regulator’s approval before closing an acquisition in Israel. Facebook has made several acquisitions in Israel, including mobile analytics company Onavo, through which it set up its first office in the country. (See Facebook stock analysis on TipRanks)

Citigroup analyst Jason Bazinet downgraded FB to Hold from Buy but maintained a $320 price target. Bazinet’s price target indicates 4.39% upside potential to the current price. The downgrade reflects the analyst’s concerns about Facebook’s ads business.

“Many investors believe ad intensity per dollar of economic activity is rising. We see little evidence of this,” noted Bazinet. He explained that advertisers have not been increasing their ad budgets, and in fact, U.S. ad spending across the board has been flat for the past 6 years.

Consensus among analysts on Wall Street is a Strong Buy based on 28 Buy and 4 Hold ratings. The average analyst price target of $387.65 implies 26.46% upside potential to current levels.

FB scores a 6 out of 10 on TipRanks’ Smart Score rating system, implying the stock’s return is likely to align with market expectations.

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