Facebook: Three Tailwinds to Consider vs. One Minor Headwind

Not many consider social media giant Facebook (FB) a slouch on the development front, but one top analyst argues “the market may be underappreciating the level of product development at FB.”

RBC analyst Mark Mahaney counts three “promising product initiatives” which he believes aren’t receiving the attention they deserve.

The first is Facebook Marketplace. Estimated to boast over 1 billion MAUs (monthly active users), making it larger than Alibaba, twice as big as eBay and approximately 12 times the size of Craigslist.

“Add it to the list of FB’s under monetized 1B+ MAU properties (incl. Messenger & WhatsApp),” says the 5-star analyst and “the win for FB is 4-fold: i) Early-Stage Ad Revenue: Sponsored Ads & Boosted Listings; ii) Commercial Signal: Queries generate a signal that can be used to target ads across FB properties; iii) Engagement: Marketplacers use Facebook more frequently; & iv) Option Value: Potential to eventually charge listing & final value & payment processing fees.”

To this end, Mahaney expects Marketplace to generate revenue of up to $2.8 billion by 2024.

Next up is Facebook Shops. The pandemic has accelerated both e-commerce trends and social media engagement and Mahaney believes Facebook will be the prime beneficiary of Social Commerce. The analyst expects “$4.9-8.0B in incremental 2025 Revenue driven by higher CPMs on more ‘transactionable’ ad units powered by Facebook Shops.”

Lastly, there is Instagram Reels, Facebook’s attempt to ride the TikTok gravy train. While it is too early to tell if the new addition will prove to be a resounding success, Mahaney believes “the product is reasonably competitive,” whilst a TikTok ban - still a possibility - could divert users to the new offering.

At the other end of the spectrum, as far as headwinds are concerned, Mahaney believes the upcoming changes to Apple’s identifier for advertisers (IDFA), which will come into effect next year, will have minimal impact of less than 1% on Facebook’s revenue.

All in all, Mahaney rates FB shares an Outperform (i.e. Buy) along with a $320 price target. Investors could be pocketing a 20% gain, should Mahaney’s target be met in the year ahead. (To watch Mahaney’s track record, click here)

Most of the Street backs Mahaney’s call. FB's Strong Buy consensus rating is based on 30 Buys, 4 Holds and 1 Sell. Given the $293.16 average price target, the analysts expect 10% from current levels. (See FB stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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