Following News Feed Change, Facebook's Loss Is Twitter's Gain, But Analysts Are Bullish

There has been growing concern among securities analysts that social media generally and Facebook specifically face significant risk of government regulation due to the growing evidence that the indiscriminate distribution of false or misleading news over their networks has influenced socio-economic and political outcomes.

While Twitter's stock has risen relatively as a potential competitive beneficiary, Facebook's has remained fairly steady because of the perception among analysts that the risk of regulation may now decrease. JL

Janko Roettgers reports in Variety and Stock News reports:

Twitter’s stock price rose just as Facebook lost 4.5% following CEO Mark Zuckerberg’s announcement that the company would tweak its news feed. Twitter is benefitting from the notion that Facebook is closing the door on news since Twitter has spent much of the past two years to reinvent itself as the place where users go to “see what’s happening.” (But some Wall Street analysts) "are positive about these changes because we believe they will be economically neutral and they lower the risk that FB gets regulated.”

Variety - Twitter profited from Wall Street doubts about Facebook’s new news strategy, with investors sending the stock up 4.4% to a closing price of $25.41. That’s the highest Twitter’s stock has been since December of 2015.
Twitter’s stock price rose just as Facebook lost 4.5% following CEO Mark Zuckerberg’s announcement late Thursday that the company would tweak its news feed in 2018 to feature fewer posts shared by publishers, and more content from friends and family.
“I’m changing the goal I give our product teams from focusing on helping you find relevant content to helping you have more meaningful social interactions,” Zuckerberg wrote in a post on his Facebook profile.
“The first changes you’ll see will be in News Feed, where you can expect to see more from your friends, family and groups,” he wrote. “As we roll this out, you’ll see less public content like posts from businesses, brands, and media.”
These changes shouldn’t have come as a total surprise to investors. Zuckerberg has for some time talked about changing Facebook to be more about communities, and the company struggled throughout 2017 with the backlash over its role in the 2016 presidential election as well as hateful and abusive posts on its platform.
In the company’s Q3 2017 earnings call, Zuckerberg already alluded to the fact that addressing these issues could depress profits in the near term. “We’re investing so much in security that it will impact our profitability,” he said at the time. “Protecting our community is more important than maximizing our profits.”Twitter has had its own challenges with hate and abuse. Originally designed as a free-speech platform, Twitter frequently struggled with finding the right responses to well-publicized instances of hate and harassment. However, Twitter did lay out a multi-step plan against hate speech in late 2017, and since banned a number of hate groups and their members.
All of that apparently went over well with investors, who helped the company’s share price climb from around $17 in October to around $24 in early January.
Now, Twitter is additionally benefitting from the notion that Facebook is closing the door on news in its newsfeed — especially since Twitter has spent much of the past two years to reinvent itself as the place where users go to “see what’s happening.”

Stock News - Investors didn’t react well to a key announcement from Facebook Inc (NASDAQ:FB) last week, in which CEO Mark Zuckerberg noted it would soon make major changes to its signature News Feed.
Specifically, Zuck said the social networking behemoth would boost posts from friends and family and downplay news items from publishers and brands. Facebook shares sold off immediately afterwards and wound up having their worst week in several months.
However, some Wall Street analysts are stepping up and defending the move. Among them is Needham & Co., which published a bullish note to clients stating the News Feed revamp is actually a welcome change. CNBC has more details:

“We are positive about these changes because we believe they will be economically neutral and they lower the risk that FB gets regulated,” analyst Laura Martin wrote in a note to clients. “By pivoting away from publishers (ie, news), FB immediately lowers its perceived power to spread ‘fake news,’ which lowers the risk of government intervention. We expect FB’s ad price to rise as time spent and/or ad units fall.”
Martin reiterated her $215 price target for Facebook shares, representing 20 percent upside to Friday’s close.

The analyst pointed to the company’s repeated warnings about a revenue plateau over the past 18 months — and the subsequent bullish reaction in the stock — as evidence that investors should buy the dip. “Selling FB’s shares on this worry proved to be a mistake in 2017,” she wrote. “What FB’s financial performance has demonstrated so far is that as FB’s ad inventory shrinks, its prices at auction become more robust, nearly frenetic.”
In other words, Facebook can probably simply raise its ad prices to make up for any News Feed shakeup-related downturn.
Facebook Inc shares rose $0.61 (+0.34%) in premarket trading Wednesday. Year-to-date, FB has gained 1.09%, versus a 3.79% rise in the benchmark S&P 500 index during the same period.
FB currently has a StockNews.com POWR Rating of A (Strong Buy), and is ranked #4 of 50 stocks in the Internet category.