It began with a tweet.
On Tuesday, President Donald J. Trump tweeted out a complaint blasting the concept of "Mail-In Ballots" as "substantially fraudulent," liable to be "forged & even illegally printed out & fraudulently signed," leading to "a Rigged Election."
Things might have ended there -- just another Presidential rant in a series of Presidential rants on social media, quickly criticized and just as quickly forgotten -- but for one thing:
For the first time ever, Twitter (TWTR) appended to the President's tweet a warning "tag" that urged users to "get the facts about mail-in ballots," and linking to a page asserting that "Trump falsely claimed that mail-in ballots would lead to ‘a Rigged Election.’ However, fact-checkers say there is no evidence that mail-in ballots are linked to voter fraud."
In so doing, Twitter apparently appointed itself to the office of Presidential fact-checker, and ignited its own special Twitter-war with the White House. On Thursday, the President took that war nuclear when he signed an executive order targeting "censorship" of posts on social media -- not just Twitter, but all social media -- and threatening lawsuits by the Federal Trade Commission against social media companies deemed to be abusing their protections (as platforms for speech, rather than speakers per se) under Section 230 of the federal Communications Decency Act.
Twitter investors are understandably nervous, while Facebook (FB) investors may be worrying that their company will get caught in the crossfire.
One investor who's not worried about all this brouhaha, however, is investment banker R.W. Baird. To the contrary, Baird sees this as potentially an opportunity to buy Twitter and Facebook on the cheap.
Dismissing the social media kerfuffle as "noise" posing only temporary "headline risk" to Twitter and Facebook shareholders, Baird analyst Colin Sebastian declared the risk of social media sites being "shut down" for violating Section 230 a "non-starter." In the more likely case that the FCC, at the President's behest, only tightens regulations on what kind of content social media sites can post, and how much they can "moderate" those posts, Sebastian says he wouldn't "expect any material impact on revenues."
The reason: It's unlikely that any content regulations will "meaningfully impact the vast majority of social media usage." Social media sites are now and will remain popular with users, and where users go, advertisers -- and advertising dollars -- will follow.
"As such," concludes the analyst, "we would view any pullbacks in shares as buying opportunities" -- should you be inclined to buy at all. In that regard, it's worth pointing out that Sebastian currently has an "outperform" rating on Facebook, which he values at $240 a share although it currently trades closer to $225.
His rating on Twitter, however -- the company at the immediate center of this firestorm -- is a less enthusiastic "neutral," and with a $27 price target suggesting about 15% downside risk from current prices. (To watch Sebastian's track record, click here)
Using TipRanks’ Stock Comparison tool, we lined up the two alongside each other to get the lowdown on what the near-term holds for these social media giants.
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