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Facebook shares slump after downgrade by MoffettNathanson

Increased scrutiny by global regulators will place the social media giant under rising pressure
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Facebook is a social media giant which is coming under increasing pressure

Shares of Facebook Inc (NASDAQ:FB) dropped on Tuesday after an analyst from media specialist brokerage MoffettNathanson downgraded the stock, saying shares will come under pressure from slowing growth, a report by CNBC said.

MoffettNathanson lowered its rating to neutral from buy, predicting Facebook will generate earnings below expectations this year, the report said.

"Facebook is increasingly under the eye of global politicians and regulators, which will force the company to become more aggressive on spending to show contrition," analyst Michael Nathanson said in a note to clients. "The deceleration in growth, coupled with continued regulatory scrutiny, is a toxic brew for any stock." 

Shares of Facebook were down 2.4% to US$171.55.

READ: Facebook launches Watch video-streaming service worldwide

Nathanson lowered his price target for Facebook shares to US$175 from US$200, the CNBC report said.

"We do not see outsized performance on the horizon as Facebook's core platform is maturing and monetizing Stories may not be the runaway success needed in the near-term to pick up the slack," he said. "Further, expenses are expected to stay elevated as Facebook plays catch-up to secure and refresh its platform."

As a result, he reduced his Facebook 2019 earnings per share estimate to US$7.90 from the consensus above US$8.

MoffettNathanson is an independent sell-side research firm. CNBC said the company is closely watched by the market in the media and telecom space.




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