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Call of the week: Why Facebook got hit with another sell rating

The call of the week is a sell rating on Facebook (FB).

Yes, a sell on Facebook. Sound crazy? Let’s put that in context. Out of 47 analysts, 42 are buy, three are neutral and only two are sell. It was only one before this week, until Pivotal Research joined that lonely bearish bandwagon.

Why would you want to bet against one of the best-performing large-cap stocks in the market? This is a company that just reported blowout earnings, with ad revenue jumping nearly 50%, and the stock is up over 47% this year, to $168-and-change per share.

But that’s exactly the point. Facebook shares have risen dramatically this year, while Pivotal’s outlook for the company has not.

Analyst Brian Wieser kept his price target at $140, saying he thinks the market isn’t appropriately considering risks to the company’s growth. “With every passing year, digital advertising is closer to a point where the market is saturated,” he wrote in a note to clients.

For example, Wieser points out that Procter & Gamble — the largest ad spender in the world — recently slashed $140 million off its digital ad spending. And guess what? P&G said its revenue growth wasn’t affected. They didn’t really notice a difference.

Wieser cites this as one reason other advertisers may start examining their own spending to see if it’s really improving revenues. He notes that large advertisers make up about 30% of Facebook’s revenue.

And while Facebook just reported massive revenue growth, that growth has been slowing for the last four quarters. So if only a few large advertisers at the margins started tightening their belts, the out-sized growth Facebook shareholders have come to expect could shrink rapidly.

Which is why Weiser’s “sell” call shouldn’t sound quite so crazy.