Privacy woes can’t keep
The social-networking giant, which has come under scrutiny for its privacy practices, said Wednesday that it agreed to pay a $5 billion fine over a long-running probe into the company’s security issues.
Nevertheless, investors are still bullish on Facebook. Shares of the company have rallied 56% so far in 2019, a sharp reversal after mounting privacy fears battered the stock last summer. The stock rose 1.1% on Wednesday to close at $204.66 after Facebook’s settlement announcement.
One reason why: Investors are still optimistic on Facebook’s advertising business. Last month, the company said it is ramping up its global advertising spending as it aims to rebuild trust with consumers. The move, according to Facebook marketing chief Antonio Lucio, could more than double the company’s advertising spending.
Facebook shares ticked higher in after-hours trading Wednesday following strong-than-expected revenue growth in the second quarter. Sales in the company’s lucrative advertising unit rose 28% to $16.6 billion last quarter from a year ago.
“As long as there’s a great return on investment for these advertisers, they’re going to continue to spend money on Facebook’s platform,” said Carter Henderson, portfolio specialist and director of institutional development at Fort Pitt Capital Group. “A lot of the public probably doesn’t trust Facebook yet, but investors are ready to move on from the security breaches, looking for future growth.”
Analysts at Goldman Sachs reiterated their “buy” rating on Facebook on Wednesday with a 12-month price target of $228, citing a favorable outlook for the company’s digital-advertising trends.
Write to Jessica Menton at Jessica.Menton@wsj.com
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