Facebook gets rare downgrade as MoffettNathanson frets growth deceleration

Shares of Facebook Inc. FB, -1.08% are down 1% in premarket trading Tuesday after MoffettNathanson analyst Michael Nathanson downgraded the stock to neutral from buy. "In the near term, we expect margin deleverage to slow 2019 operating income growth down to the low teens, which should limit further multiple expansion," he wrote. "The deceleration in growth, coupled with continued regulatory scrutiny, is a toxic brew for any stock." Nathanson lowered his price target to $175 from $200, writing that investors are questioning whether to believe Facebook’s latest outlook for significant growth deceleration given that the last time management delivered a doom-and-gloom forecast, it turned out to be a false alarm. "Even if Facebook beats its own guidance, it has a higher hurdle to clear before convincing the market that business conditions are back to normal," he argued. Of the 48 analysts who cover Facebook, according to FactSet, 41 have buy ratings, five have hold ratings, and two have sell ratings. Facebook shares are up 2.2% over the past 12 months, while the S&P 500 SPX, +0.01% has gained 17%.

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