Mark Zuckerberg wrote thousands of words about his solutions to what ails Facebook Inc. this week, but one Wall Street analyst thinks the answer is much simpler.
Stifel’s Scott Devitt wrote Friday that a leadership “shake-up” could benefit Facebook FB, -3.00% by turning around falling employee morale, public perception, and a stock price that’s off 22% over the past 12 months.
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“With Facebook management under more scrutiny than ever, the campaign trail to rebuild credibility will be long and difficult,” he wrote.
“In our view, Facebook’s board and management team could accelerate the
credibility rebuild by considering making change(s) at the top of the
organization.”
A management transition could be “a positive catalyst for the stock” that would be viewed favorably by “the vast majority of constituents,” he wrote.
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Facebook cofounder and largest investor Zuckerberg would likely not be among that majority. He has refused calls to step down as chairman, much less chief executive, and his board has also shown support for fellow board member Sheryl Sandberg and other leaders. In the end, Zuckerberg is the only one who matters, as he has complete voting control thanks to Facebook’s dual-class stock structure.
Still, Devitt sees precedent among past founder/CEOs who decided their companies might be better served by another top executive.
See also: Facebook says criticism over how it handled Russia interference is ‘unfair’
“For a significant change to happen, Zuckerberg will need to view managerial or governance change not as defeat, failure, or an admission of fault, but as the best thing for the business going forward,” he wrote. “Microsoft Corp. MSFT, +0.94% and Alphabet Inc. GOOGL, -0.26% are other examples of companies with founders who moved to non-CEO roles at relatively early stages.”
Devitt also drew comparisons between Facebook and Uber Technologies Inc., a startup that suffered numerous public-relations crises under cofounder Travis Kalanick’s leadership. Kalanick was eventually replaced by Dara Khosrowshahi, who formerly led Expedia Inc. EXPE, -2.34%
Read: It’s time to stop lumping Netflix in with the other FAANG stocks, says analyst
Devitt remains bullish on Facebook shares even if the leadership team stays in place, arguing that the company’s various platforms, including Instagram, WhatsApp, and the core Facebook service, should maintain their dominance. He rates the stock a buy with a $186 price target.
Facebook shares ended Friday down 3%. They’re off 21% so far this year, while the S&P 500 SPX, +0.22% has gained 2.3%.
read more: https://www.marketwatch.com/story/mark-zuckerberg-should-start-at-the-top-with-facebook-changes-analyst-says-2018-11-16
Stifel’s Scott Devitt wrote Friday that a leadership “shake-up” could benefit Facebook FB, -3.00% by turning around falling employee morale, public perception, and a stock price that’s off 22% over the past 12 months.
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A management transition could be “a positive catalyst for the stock” that would be viewed favorably by “the vast majority of constituents,” he wrote.
Don’t miss: Google parent Alphabet’s stock becomes 2nd FANG to produce ‘death cross’ and Netflix is next
Facebook cofounder and largest investor Zuckerberg would likely not be among that majority. He has refused calls to step down as chairman, much less chief executive, and his board has also shown support for fellow board member Sheryl Sandberg and other leaders. In the end, Zuckerberg is the only one who matters, as he has complete voting control thanks to Facebook’s dual-class stock structure.
Still, Devitt sees precedent among past founder/CEOs who decided their companies might be better served by another top executive.
See also: Facebook says criticism over how it handled Russia interference is ‘unfair’
“For a significant change to happen, Zuckerberg will need to view managerial or governance change not as defeat, failure, or an admission of fault, but as the best thing for the business going forward,” he wrote. “Microsoft Corp. MSFT, +0.94% and Alphabet Inc. GOOGL, -0.26% are other examples of companies with founders who moved to non-CEO roles at relatively early stages.”
Devitt also drew comparisons between Facebook and Uber Technologies Inc., a startup that suffered numerous public-relations crises under cofounder Travis Kalanick’s leadership. Kalanick was eventually replaced by Dara Khosrowshahi, who formerly led Expedia Inc. EXPE, -2.34%
Read: It’s time to stop lumping Netflix in with the other FAANG stocks, says analyst
Devitt remains bullish on Facebook shares even if the leadership team stays in place, arguing that the company’s various platforms, including Instagram, WhatsApp, and the core Facebook service, should maintain their dominance. He rates the stock a buy with a $186 price target.
Facebook shares ended Friday down 3%. They’re off 21% so far this year, while the S&P 500 SPX, +0.22% has gained 2.3%.
read more: https://www.marketwatch.com/story/mark-zuckerberg-should-start-at-the-top-with-facebook-changes-analyst-says-2018-11-16
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