+ 0.70
+ 0.47%

Facebook's New Shopping Feature Lifts Stock To All-Time Highs

May 20, 2020 1:10 pm
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More
Facebook's New Shopping Feature Lifts Stock To All-Time Highs

Facebook, Inc. (NASDAQ:FB) launched a new e-commerce featured called "Shops" that could better position the company to compete against more established third-party e-commerce platforms.

Facebook said it's working closely with partners like Shopify Inc (NYSE:SHOP) to better give small businesses the support they need.

BofA: Compete Against Amazon And Others

BofA Securities analyst Justin Post said Facebook's new shopping platform including checkout features like Instagram Checkout will better help the social media company diversify its content and functionality.

The new venture will also help brands better monetize their products, which implies Facebook would compete against Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY) and Etsy Inc (NASDAQ:ETSY).

Facebook's "visual nature" should blend well with "influencer-driven shopping," according to Post. As such, Facebook could notably improve its user monetization rate across both Facebook and Instagram in the new e-commerce vertical space.

It's difficult to model expectations for incremental revenue, but Post said $1.5 billion in incremental revenue for each 10% increase in e-commerce activity is a reasonable assumption.

Post maintains a Buy rating on Facebook's stock with a $240 price target.

Morgan Stanley: Multi-Billion Dollar Annual Opportunity

Morgan Stanley analyst Brian Nowak said consumer e-commerce trends are "moving in Facebook's direction," especially after shelter-in-place activity provided a lift to online buying. Over time, Facebook's new features could result in even broader "social shopping" across businesses and retailers of all shapes and sizes.

Monetization of Instagram's platform alone represents a potential $4 billion of yearly incremental ad revenue starting in 2021.

Nowak maintains at Overweight, $230 price target.

Tigress: 'Instant Success'

Tigress Financial Partners CIO Ivan Feinseth said Facebook will integrate artificial intelligence and product recognition technologies to identify manufacturers of products that are embedded in images and provide users with links to retailers. This should help the new e-commerce platform become an "instant success" and help drive incremental monetization of its "massive" user base.

"I believe further upside exists from current levels and continue to recommend purchase," he wrote.

4C: Ideal Timing

Facebook's expansion into online sales "couldn't have come at a better time," Aaron Goldman, the CMO of global insights company 4C, said in an e-mail. While the integration of content and commerce isn't a new concept, it accelerated throughout the COVID-19 pandemic.

Facebook is also well positioned as a middleman to satisfy the wants and needs of both consumers and brands. Consumers are looking for new entertainment and shopping options while brands are looking for new venues to target customers and lift their sales.

"Facebook Shops is the right play at the right time especially when you consider that it extends across the Facebook, Instagram, WhatsApp, and Messenger to the tune of 3 billion monthly users," according to Goldman.

FB Stock

Facebook's stock traded higher by 5.8% to $229.65 per share at time of publication.

For the latest in financial news, exclusive stories, memes follow Benzinga on Twitter, Facebook & Instagram. For the best interviews, stock market talk & videos, subscribe to Benzinga Podcasts and our YouTube channel.

Related Articles

9 Amazon Analysts Break Down Q2 Earnings: 'Comps Tougher Than Expected'

Amazon.com, Inc. (NASDAQ: AMZN) shares traded lower by 7% on Friday after the company reported slowing revenue growth in the second quarter and issued weak guidance for read more

How The iPhone 13 Is Driving Morgan Stanley's Apple Bull Case

Following a lackluster start to the year, Apple, Inc.'s (NASDAQ: AAPL) stock has risen over 20% since June, outpacing the S&P 500 by 16 points. A Morgan Stanley analyst detailed Thursday why they're bullish on the iPhone manufacturer's stock.  read more

Emerging EV Market Dynamics: BofA Says GM, Volkswagen Aggressive Among Legacy Automakers

The lead that internal combustion vehicles have is shrinking as electric vehicles steadily find increasing adoption, according to a BofA Securities analyst.  read more

Here's How Much New G7 Tax Proposals Could Hurt FANG Stocks

Over the weekend, finance ministers from G7 economies agreed to new global tax policies that could potentially have a major impact on big tech stocks. What Happened: G7 members Canada, France, Germany, Italy, Japan, the United Kingdom and the United States pledged to enforce a minimum global corporate tax rate of at least 15%. read more