Market Overview

Facebook Steps Up Its Efforts To Crush Snapchat With New App Launch

Facebook Steps Up Its Efforts To Crush Snapchat With New App Launch
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Facebook, Inc. (NASDAQ: FB) is once again taking direct aim at Snap Inc (NYSE: SNAP).

The social media giant has become accustomed to copying Snapchat features and incorporating them into its Instagram platform.

The latest move intends to make Instagram even more Snap-like, with a separate standalone app that will incorporate more private messaging, similar to Snapchat's direct messaging feature.  

Despite the announcement, Snap shares were surging nearly 8 percent at the time of publication. 

The Expert

Justin Post of Bank Of America maintained a Buy rating on Facebook with a $210 price target.   

The Thesis

Facebook is testing a standalone Instagram messaging app called Direct.

According to a report from The Verge, Direct looks a lot like earlier versions of Snapchat, where it opens directly to the camera and keeps the augmented reality masks and filters. A profile screen sits to the left of the main camera screen and an inbox sits to the right, similar to Snapchat. Direct and Instagram are tightly integrated, giving users the ability to swipe past the inbox directly into the Instagram app, and the ability to swipe out of Instagram and into Direct.

The app is being tested in international markets: Chile, Israel, Italy, Portugal, Turkey and Uruguay.

“Snapchat emulation is not new for Facebook, but full launch of Direct would reflect an elevation in competitive focus for Facebook, in our view. Given Facebook and Instagram’s global reach, full scale rollout could hinder Snap’s plans to accelerate global expansion,” Post said in a Sunday note. (See Post's track record here.) 

Facebook is heavily focused on more standalone apps to drive further expansion. Along with WhatsApp and Messenger, Direct would mark the third major standalone messaging app launched by Facebook and is seen as a potential avenue to expand engagement with younger users that maintain an affinity for Snapchat’s messaging and one-to-one photo sharing.

Despite initial pushback at the launch of Facebook’s standalone app Messenger, the app now has 1.3 billion monthly active users. With Instagram’s 800 million monthly active users, through a similar forced migration of existing users to Direct, Facebook is hoping its latest initiative will take the same trajectory.

Price Action

Facebook was up 0.18 percent to $179.30 at the time of publication.  

Related Links

5 Reasons To Start Buying Snap's Stock, According To Barclays

Facebook's Messenger Kids: Will It Succeed Where SnapKidz Failed?

Latest Ratings for FB

Apr 2018ArgusMaintainsBuyBuy
Apr 2018Stifel NicolausUpgradesHoldBuy
Apr 2018UBSMaintainsBuyBuy

View More Analyst Ratings for FB
View the Latest Analyst Ratings

Posted-In: Bank of America Instagram Justin Post social mediaPrice Target Reiteration Analyst Ratings Best of Benzinga


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