Shares of Twitter ( TWTR ) popped Friday as Facebook ( FB ) said it would adjust the flow of content that users see on its website, a move it acknowledged could cause users to spend less time on the social network.
[ibd-display-video id=3079086 width=50 float=left autostart=true] Whether the Facebook shift in strategy will cause users to spend more time on Twitter and its news-hungry power users instead isn't clear. But analysts expressed concern that Facebook's strategy shift could be an indication that user satisfaction is slipping, raising uncertainty about the impact on Facebook revenue growth.
Twitter shares were up 5% near 25.50 during afternoon trading on the stock market today and hit a two-year high. BTIG Research's Richard Greenfield raised his price target on Twitter on Friday to 30 from 25, saying the company was in the early stages of a multiyear turnaround.
"The end result has been not just more users of the Twitter platform, but a far more engaged user base coming back more often on a daily basis and spending significantly more time on the platform each day," Greenfield wrote. His report did not make reference to the Facebook news.
Facebook stockfell below a buy point as the changes to the core portion of its website, called News Feed, looks to promote "more meaningful social interactions" but is doing so at the expense of engagement and content from businesses, brands and media.
Shares of Facebook fell 4.3% to 179.77 in afternoon trading in massive volume.
Facebook Chief Executive Mark Zuckerberg announced the changes on Facebook late Thursday. He said Facebook users have complained that posts from businesses, brands and media were cluttering the site and "crowding out the personal moments that lead us to connect more with each other."
"Since there's more public content than posts from your friends and family, the balance of what's in News Feed has shifted away from the most important thing Facebook can do - help us connect with each other," Zuckerberg wrote.
He added, "I expect the time people spend on Facebook and some measures of engagement will go down," but that the time spent will be "more valuable."
IBD'S TAKE:Facebook stock tumbled below a recent 183.45 flat-base buy point but is fighting to hold its 50-day moving average after falling initially to 177.40. Facebook this week received positive reports from two Wall Street analysts on Monday, with one calling the social networking giant its " top pick for 2018 ."
Stifel Nicolaus lowered Facebook to a hold rating from buy.
"There is too much uncertainty relating to the economic impact of Facebook's pending News Feed changes for us to be comfortable retaining a Buy rating on the stock," Stifel said in the report to clients.
RBC Capital Markets analyst Mark Mahaney maintained its outperform rating on Facebook shares and price target of 230.
"We see Facebook's News Feed change as Facebook reacting to greater public scrutiny of its value proposition, and the company is probably reacting to signs of slipping satisfaction among its user base," Mahaney wrote. But he thinks the changes will ultimately be beneficial to Facebook.
"Overall, we do not think this will have any meaningful impact on advertising revenue growth," he wrote.
Piper Jaffray analyst Sam Kemp maintained an overweight rating on Facebook and a price target of 200.
"We see this as the right long-term decision for the platform and, over the near-term, doubt that this will have a material impact for two reasons," Kemp wrote.
One reason is the strength of Instagram, the photo and video-sharing mobile platform that continues to grow. The other is the demonstrated willingness of advertisers to absorb higher ad prices.
Facebook reports fourth-quarter earnings after the market close Jan. 31.
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