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Facebook: A Unique Proposition Set Up for Further Growth
Stock Analysis & Ideas

Facebook: A Unique Proposition Set Up for Further Growth

Is there anything out there like Facebook (FB)? Not according to RBC’s Brad Erickson. While other social media platforms have their respective merits, the 5-star analyst says FB has “captured unmatched knowledge of the world’s consumers.”

The company’s ability to “deepen its relationship” with almost 3 billion users will drive the next leg of growth. And here Erickson thinks that via “multiple product initiatives,” the company is well set up to “transition from a social-centric platform to a fuller source of online utility.” From an investing perspective, the analyst thinks all this action will prove to be beneficial to shareholders over time.

Moreover, those billion of users are a source of deep data troves and great news for advertisers, which in turn, is great news for Facebook. Through obtaining “differentiated knowledge of the consumer,” which allows for “best-in-class targetability and ROI for advertisers,” the company has built one of the most valuable ad franchises in the world. With the shift from offline to online ongoing, the digital realm is expected to grow the global advertising’s TAM beyond the $478 billion it currently generates. 

Beyond advertising growth, there are also “multiple opportunities for huge vertical expansion.” The analyst singles out Shops especially as having “enormous potential across broader horizontal E-commerce.” Less than a year following the mid-2020 announcement of Facebook Shops, the company had already clocked more than 250 million MAUs and 1 million sellers, its cross-platform features facilitating “new means of customer connectivity.”

There is also the metaverse to look forward to, which could potentially be “one of the most transformative investment themes.” Erickson believes that “If anyone was positioning themselves to colonize and capitalize best off of this opportunity, it’s very likely to be FB,” although it still not much more than a concept and will probably take a while until this opportunity comes into play.

As far as issues to look out for, the uncertainty surrounding iOS’s IDFA changes – which limits Facebook’s ad targeting abilities – is certainly one to consider, but Erickson says this factor is “largely built into the stock,” and as such, his estimates “contemplate modest incremental headwinds.”

Unsurprisingly, Erickson rates FB shares an Outperform (i.e. Buy) along with a $425 price target. The implication for investors? Upside of 30%. (To watch Erickson’s track record, click here)

Most on the Street agree. FB stock boasts a Strong Buy consensus rating, based on 25 Buys, 4 Holds and 1 Sell. The average price target is just below Erickson’s; at $422.48, the figure implies one-year upside of 29.5%. (See Facebook stock analysis on TipRanks)

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

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