Facebook shares fall 5% after it announces big changes to the News Feed

Facebook shares fell 6 percent in morning trading Friday after it announced major changes to its News Feed Thursday night. 

Shares fell as much as 4.1 percent ahead of the market open, after closing just below the flatline on Thursday.

Mark Zuckerberg, the CEO of the social media giant, said that the News Feed — one of the key areas of Facebook where advertising is placed — will start prioritizing “meaningful social interactions” versus “relevant content.” Zuckerberg said this could mean that users spend less time on the social network.

Users will also see fewer posts from publishers and businesses. Investors are concerned that this could hit Facebook’s advertising figures.

It’s not the first time Zuckerberg has said the company would change the algorithm in the News Feed to move away from news, and emphasize content more relevant to individual users. Last June, Zuckerberg announced that intention in a blog post.

The goal of News Feed is to show people the stories that are most relevant to them. Today, we’re announcing an update to News Feed that helps you see more posts from your friends and family.

Wall Street was not necessarily worried, though.

In a note released late Thursday, Daniel Ives, head of technology research at GBH Insights said that while the News Feed change could be “worrisome in terms of an ad growth hiccup,” the overhaul was the right move in the longer term. Ives raised his price target on Facebook shares to $225 from $210, representing nearly 20 percent upside from Thursday’s close.

Suntrust Robinson also raised its price target on the stock to $240 from $215 on Friday.

Most of Wall Street is bullish on Facebook’s outlook for 2018. There are 17 “strong buy” ratings and 25 “buy” rating, according to Thomson Reuters data. Just three analysts have either a “hold”, “sell” or a “strong sell” rating.

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