One of Wall Street’s top analysts shares insights on two leading internet giants, Facebook Inc (NASDAQ:FB) and Alphabet Inc (NASDAQ:GOOGL), as Facebook launches its new mobile app that will enable a new kind of buyer-seller interaction, while Alphabet responds to competitors with two new phones, new hardware, and a new OS roll-out. Let’s take a closer look:
Facebook launched its new mobile app feature Marketplace yesterday, enabling local buyers and sellers to connect with one another, the social media giant’s attempt at a more “mobile-centric” interface endeavor that simplifies the interactions.
This local Marketplace app will also make classified listings possible on Facebook, including a photo, title, description, and asking price to be viewed by public consumers, with the company adding Make Offer and Message Seller buttons for users to manage in a section called “Your items.” Instead of executing the closing transaction, Facebook chooses to underscore creating connections and managing past interactions as its true focus.
Merrill Lynch top analyst Justin Post notes that though FB has attempted a local shopping service nine years ago, the “mobile focus is all the difference” and could provide gains in “meaningful traction” that Marketplace 1.0 lacked. As such, Post reiterates a Buy rating on shares of FB with a $150 price target, which represents a 17% increase from where the stock is currently trading.
“Marketplace ads are another feature to drive engagement, with a small positive benefit to usage if the feature gains transaction. We remain positive on Facebook heading into 3Q, as we believe strong engagement, pricing tailwinds and underlying growth in advertisers position the company well for a potential beat. Longer term, we are positive given the multiple untapped potential revenue sources (Messenger, WhatsApp, Live streaming, search),” Post concludes.
As usual, we like to include the analyst’s track record when reporting on new analyst notes. According to TipRanks, top five-star analyst Justin Post has achieved a high ranking of #15 out of 4,197 analysts. Post upholds a 77% success rate and realizes 19.9% in his annual returns. When recommending FB, Post yields 36.3% in average profits on the stock.
TipRanks analytics indicate FB as a Strong Buy. Based on 38 analysts polled in the last 3 months, 33 rate a Buy on FB, while 5 maintain a Hold. The 12-month price target stands at $156.91, marking a nearly 23% upside from where the shares last closed.
Alphabet is dominating the rumor mill with chatter about its next generation phones anticipated for a launch today on the heels of UK network/retailer Carphone Warehouse’s leak. These phones are a palpable step away from the Nexus phones, and the Pixel and Pixel XL are allegedly ready for a competitive roll-out, designed to rival both the Samsung Galaxy S8 as well as the iPhone 7/7 Plus.
The Pixel phones, regular and XL, will come with AMOLED screens, Qualcomm’s most recent Snapdragon 821 processors, 4GB RAM, which tops the iPhone 7/7Plus’s 2 and 3 GB, respectively, and a “slightly” higher MP front camera.
Ahead of the Pixel phones launch event, Merrill Lynch top analyst Justin Post reiterates a Buy rating on GOOGL with a price target of $960, which represents just under a 20% increase from where the shares last closed.
Post notes, “The Pixel marketing pages also appear to highlight faster battery charging (7 hours of life in 15 minutes), but we see no indication of water resistant features of competitors. Demand for new phones has proven difficult to forecast with more disappointments than successes, but it seems to us that Google is introducing a competitive device.”
More so, Post anticipates two other “key” hardware launches, from the “anticipated” Daydream VR headset, which was expected to launch in the Fall, and seems like a “logical announcement on the back of the two likely VR-ready handset devices,” to Google Home, Alphabet’s “competitive answer to Amazon’s Echo,” the analyst comments. Yet, Post contends Andromeda Nougat (N), GOOGL’s expected added OS announcement, a prospective Android-OS-meets-Chrome-OS combo, could be the “highlight” of the event.
Even so, the analyst opines, “We do not view the launch event as a major catalyst to the stock at this point as most of the releases have been highly anticipated, vetted, and in some cases, already leaked. Initial reception appears positive, but at the end of the day, investors are more focused on tougher 2H ad comps and impact of recent ad format changes.”
Five months down the road, Post believes investors could become less cautious and more positive amid less challenging comps.
TipRanks analytics exhibit GOOGL as a Strong Buy. Based on 32 analysts polled in the last 3 months, 31 rate a Buy on GOOGL, while 1 issues a Sell. The consensus price target stands at $944.55, marking a nearly 18% upside from where the stock is currently trading.