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Facebook stock gains after JPMorgan predicts strong turnaround this year

Facebook (FB) got a new lease of life this week after JPMorgn came up with an exceptionally bullish outlook on the company. Defying the negative sentiment on its prospects this year, with several experts predicting a further deterioration, the brokerage firm Tuesday said Facebook’s stock is on the road to a strong turnaround.

Maintaining the overweight rating and the $195 price target, the analyst gave thumbs up to the prospective investors in Facebook. The upbeat view contrasts with the widespread skepticism about the chances of Facebook rising from its current lows in the near term. The modest recovery that started after last month’s one-year low gathered pace following today’s announcement, and the stock gained about 3% in the early trading hours.

Maintaining the overweight rating and the $195 price target, the analyst gave thumbs up to the prospective investors in Facebook

Countering the pessimism associated with controversies surrounding Facebook, the JPMorgan analyst upheld the company’s impressive quarterly numbers, stable user engagement and the rapid growth of Instagram. The assessment is based on an extensive survey of internet users, conducted by the bank recently, which showed that the majority of respondents continued to use the social media platform. The analyst also factored in the new avenues opening up for Facebook and the related apps for revenue generation.

Facebook – Hits and misses of 2018

Meanwhile, a section of market watchers believes that the ghosts of last year’s data scandals might continue to haunt Facebook and its CEO Mark Zuckerberg. Considering the intense scrutiny of Facebook’s operations, after the tech giant got embroiled in a series of data-misuse and security-breach cases, 2019 will likely be a year of mixed fortunes for it.

In order to sustain revenue growth in the current fiscal year, Facebook must take effective steps to ensure that user data is not misused by its advertising partners. Going forward, profitability will also depend on the quantum of any data-related penalty the company may encounter, which will further escalate the cost pressure.

Already battered by the Cambridge Analytica data breach scandal, Facebook shares fell about 20% in July last year after the company reported weaker than expected quarterly results, marked by sluggish user growth. Since then, the stock has been in a free fall, losing about 32%.

 

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