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Why JPMorgan, Nomura Love Facebook's New Payment Feature

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Why JPMorgan, Nomura Love Facebook's New Payment Feature
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Social media giant Facebook (NASDAQ: FB) announced in a blog post on March 17th that it is adding a payment feature to its messenger application. The service will allow Facebook users to upload a Visa or MasterCard debit card to their messenger applications in order to send and receive money to their friends at no charge. Users will also be able to send and receive money from Apple and Android devices and desktop computers.

Facebook has been trying to come up with a way to generate revenue from its messenger app for about a year as the majority of its monetization comes from advertising. Analysts believe that the company's new payment feature will eventually be integrated into WhatsApp; a messaging app that Facebook acquired for $22 billion last year.

Facebook was quick to address security concerns, stating "We use layers of software and hardware protection that meet the highest industry standards. These payment systems are kept in a secured environment that is separate from other parts of the Facebook network and that receives additional monitoring and control. A team of anti-fraud specialists monitor for suspicious purchase activity to help keep accounts safe."

Facebook's biggest competitor in this field is PayPal's Venmo; an application that allows users to send and receive money from mobile devices at no extra cost. Technology giants Apple Inc. (NASDAQ: AAPL) and Google Inc (NASDAQ: GOOGL) also joined the financial sector somewhat recently with Apple Pay and Google Wallet, respectively.

JP Morgan analyst Doug Anmuth weighed in on Facebook on March 17, maintaining an Overweight rating on the stock with a price target of $85. The analyst reiterated that Facebook is still one of his top picks for 2015 and although the company is slowly figuring out ways to monetize its business, its Instagram, Messenger, and WhatsApp franchises remain strong. In addition, Anmuth cited "continued strong engagement" on Facebook's mobile platform, with about 22 percent of its users who access Facebook on their mobile phones.

Anmuth has rated Facebook 35 times since June 2012, earning an 85 percent success rate recommending the social media giant and a +60.3 percent average return per FB recommendation. Overall, he has a 71 percent success rate recommending stocks and a +25.5 percent average return per recommendation.

Similarly on March 17, Nomura Securities analyst Anthony Diclemente maintained a Buy rating on Facebook with a $96 price target. DiClemente reasoned his bullish rating on Facebook with the increasing growth potential of the company's video advertisements. The analyst believes that Facebook's video ads have the potential to rake in as much as $3.8 billion in advertising revenue in 2017 and that its revenue could increase 11 percent over the next two years.

DiClemente has rated Facebook 13 times since June 2012, earning an 89 percent success rate recommending the company and a +13.7 percent average return per FB recommendation. Overall, he has a 66 percent success rate recommending stocks and a +7.2 percent average return per recommendation.

On average, the top analyst consensus for Facebook on TipRanks is Strong Buy.

Latest Ratings for FB

DateFirmActionFromTo
Feb 2017Pivotal ResearchDowngradesBuyHold
Jan 2017Pacific CrestReinstatesOverweight
Jan 2017Raymond JamesUpgradesOutperformStrong Buy

View More Analyst Ratings for FB
View the Latest Analyst Ratings

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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