Long before Facebook Inc. shares took their historic dive, after second-quarter earnings missed the average Wall Street estimate for sales and user growth, two analysts were already recommending to sell the stock.
Brian Wieser, of Pivotal Research Group, has had a sell rating on Facebook since last year. Societe Generale SA's Simon Baker has the other sell call and has held that view since at least 2015, according to data compiled by Bloomberg. Wieser also has a Street-low price target of US$140, about 20 per cent below the US$174.78 low reached so far in New York trading Thursday. The stock has 42 buy recommendations and four holds.
"What a lot of the investment community has missed, is that they looked at growth as rather infinite," Wieser said in an interview on Bloomberg TV, referring to digital advertising. "This is only part of a bigger story that hasn't fully played out yet."
For a while, Wieser had reason to worry about his contrarian rating. There were volatile periods, including about a 20 per cent-plunge over two weeks in late March after revelations of the Cambridge Analytica scandal. But the stock remained largely resilient through the past few months of tumult. The shares closed Wednesday at a record high of US$217.50 before earnings were announced.
Then everything changed after Facebook reported sales and user growth numbers that missed estimates. And Chief Financial Officer David Wehner said revenue growth rates would decline in the third and fourth quarters. Most analysts were blindsided, asking frequently on a conference call with executives for more information on exactly how the company's financial future had changed so dramatically.
