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Apr 4, 2019

Facebook trading at highest level since August after upgrade

Amanda Lang: It's time for social media to grow up


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Facebook shares extended their 2019 rally on Thursday, after the stock was upgraded to buy from neutral at Guggenheim, which wrote that positive user trends would help offset the financial risk represented by various privacy concerns.

Shares rose as much as 2.3 per cent, putting the stock on track for its highest close since August. At current levels, Facebook has gained more than 40 per cent off a December low.

“Investors will continue to gain comfort with the incremental financial risk created by content and privacy concerns,” analyst Michael Morris wrote to clients. “At the same time, we believe usage trends have remained solid,” led by Instagram and global growth.

On Wednesday, Facebook user data was found inadvertently posted publicly on Inc.’s cloud computing servers.

Loop Capital on Thursday wrote that “the biggest risk” to Facebook was regulation, “both domestic and international, due to privacy issues, the Cambridge Analytica crisis and the recent security breach.” However, it affirmed its buy rating and US$200 price target, saying the stock was “attractively priced, particularly if one imputes value for WhatsApp and Messenger.”

Guggenheim raised its own target on Facebook to US$200 from US$175, putting it slightly above the US$197 average target.

“We still view the company’s video strategy as un-developed and see the economic opportunity as limited without uniquely recognizable content and a presence on the television screen to complement the mobile experience,” Guggenheim wrote, adding that the potential for Facebook to monetize its commerce and messaging functions were “attractively priced within shares.”

Earlier this week, Deutsche Bank estimated that the company’s move into e-commerce via its Instagram app could add billions of dollars to the company’s revenue within a few years.