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Facebook Analyst Says Verizon Boycott Increases Risk Of 'Snowball Effect'

Verizon Communications Inc. (NYSE: VZ) has become the latest high-profile company to halt its advertising on Facebook, Inc. (NASDAQ:

Benzinga · 06/26/2020 18:17

Verizon Communications Inc. (NYSE:VZ) has become the latest high-profile company to halt its advertising on Facebook, Inc. (NASDAQ:FB) platforms in support of the “Stop Hate for Profit” civil rights campaign.

On Friday, one Wall Street analyst said the advertising boycott could make the months of June and July difficult for Facebook.

The Facebook Analyst

BofA Securities analyst Justin Post reiterated a Buy rating on Facebook with a $265 price target.

The Facebook Thesis

In a new report, Post said the online advertising space was trending for significant improvement in the month of June, but protest-related boycotts have likely triggered another downtick in advertising spend. 

Facebook and Twitter Inc (NYSE:TWTR) will likely be hit hardest by the boycotts due to the nature of their content, the analyst said, with Pinterest Inc (NYSE:PINS) and Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) likely seeing less of an impact.

A Verizon spokesperson said the company is halting advertising on Facebook and Instagram until the company can find “an acceptable solution that makes us comfortable.”

Other advertisers that are boycotting Facebook include ice cream maker Ben and Jerry’s, Patagonia and VF Corp (NYSE:VFC).

The online media space has an unprecedented amount of uncertainty in the online media space, and investors shouldn’t expect most companies to issue third-quarter guidance, Post said. 

For now, the key for Facebook will be whether the “Stop Hate for Profit” campaign gains additional momentum, the analyst said. 

“As of now, our checks have suggested that the impact of boycotts may not be material (FB has 8mn advertisers in the auction), but if key influencers in other large sectors join in, there is risk of a nearterm ‘snowball’ effect.”  

Facebook shares were down 7.11% at $218.92 at the time of publication Friday.

Benzinga’s Take

Facebook has been dealing with blowback for its content and criticism over enforcing its terms of service since at least the 2016 election.

Despite wave after wave of PR problems, Facebook has always managed to deliver the earnings and revenue growth that are seemingly most important to its investors and its share price.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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