Market News

Facebook’s CEO Reaches Out To Australian Lawmakers Over Proposed Law – Report

According to a Reuters report published on Jan. 31, last week, Facebook CEO Mark Zuckerberg reached out to lawmakers in Australia to discuss a planned law that would result in internet giants like Facebook (FB) and Google (GOOGL) paying media outlets for content used on their sites. However, Mark Zuckerberg failed to persuade lawmakers to change the policy, according to Reuters.

The report also says that Australian Treasurer Josh Frydenberg told Australian Broadcasting Corp, “No, Mark Zuckerberg didn’t convince me to back down if that’s what you’re asking.”

According to the proposed law, news media outlets can negotiate collectively or individually, over content that drives traffic to Facebook and Google’s websites. If these parties fail to reach an agreement, an arbitrator appointed by the Australian Government will set the fees for both parties.

In view of this proposed law, earlier this month, Facebook had said that it will stop news sharing if the Australian government proceeds while Google threatened to withdraw its search engine from the country.

Companies like Facebook are opposing this law as it would mean an increase in compliance costs and could also put a dent in its advertising revenues as the proposed law also states that companies will have to share their consumer data from such news content. Advertising is a major source of revenue for Facebook. (See Facebook stock analysis on TipRanks)

In the fourth quarter, Facebook reported advertising revenues of $27.2 billion, up by 31% year-on-year. The advertising business made up about 96.8% of total revenues in 4Q for the company. Mark Zuckerberg also warned of the timing of “platform changes, notably iOS 14, as well as the evolving regulatory landscape,” during Facebook’s 4Q results.

William Blair analyst Ralph Schackart reiterated a Buy rating on the stock on Jan. 28. Commenting on the company’s 4Q results, Schackart noted, “In the first half of 2021, Facebook will lap a period of growth that was negatively affected by reduced advertising demand during the early stages of the pandemic. Thus, year-over year growth rates in total revenue are expected to remain stable or modestly accelerate sequentially during the first and second quarters of 2021.”

“In the second half of the year, Facebook will lap periods of increasingly strong growth, which is expected to put significant pressure on year-over-year growth rates,” Schackart added.

The rest of the Street is bullish about the stock with a Strong Buy consensus rating. That’s based on 35 analysts recommending a Buy, 3 analysts suggesting a Hold, and one analyst recommending a Sell. The average analyst price target of $341.28 implies a 32.1% upside potential to current levels.

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