RBC Capital Markets Reiterates Outperform Rating on Facebook Citing Underappreciated Product Development
On Wednesday, RBC Capital Markets analysts reiterated their Outperform rating and $320 price target on Facebook, Inc. (NASDAQ: FB). Facebook has inserted itself into developing three encouraging product initiatives that lead analysts to “come away with greater conviction” in their above consensus 2021 estimates.
Facebook’s level of product development has been deemed by analysts to be very “underappreciated” in the market. However, the addition of Marketplace, Shops, and Reels has served to add leverage to the company’s positioning amongst its competitors. These initiatives should help drive increased user engagement, provide Facebook with additional monetization opportunities, and significantly benefit from the company’s leading position in “Social Commerce”.
“The COVID-generated inflections in Online Retail and Social Media usage have created a massive opportunity that FB is extremely well-positioned against.”
“We believe FB still needs to get much closer to a ‘One-Click’ shopping experience (more products enabled by Instagram Checkout and less payments friction via greater Facebook Pay adoption), but we view Social Commerce as one of the most powerful trends on the Internet today and FB as arguably the best way to play it”, stated the analysts.
The analysts further noted: “Based on our analysis, Facebook Marketplace’s estimated ~1B MAUs [monthly active users] makes it the largest platform of its kind and growing faster than most of its peers (some of the largest of which appear to be declining). We also believe Facebook has competitive advantages in terms of its scale, product innovation, and messaging capabilities that will translate to further market share gains over time.”
Although the upside for Facebook looks promising, there are still major risks analysts believe investors would have to consider which includes “broad decreasing engagement trends as new competitors arise and take market share, failure to drive significant adoption from major advertising brands limitations due to regulatory/user actions on privacy concerns, and poor user reaction to site redesign/new product initiatives.”
All in all, Facebook still looks to be very attractive at current levels. The company has exemplary strategies of monetizing its very large and growing user base to become profitable in various ways.
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Disclosure: At the time of publication, I have no positions in any of the securities mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.