Barclays Re-Visits Facebook’s (FB) Payment Opportunity; Reiterates Overweight on the Stock


Mark Zuckerberg recently announced that Facebook (FB) would shift its model to one that is more privacy-friendly, a move that may bode well with its users, but has drawn some criticism from analysts and investors — who say, if it ain’t broke, don’t fix it. But Barclays analyst Ross Sandler is not to look at this negatively — he is still optimistic on the stock in the long-term, maintaining his Overweight rating and $210 price target, which implies nearly  (To watch the analyst’s track record, click here)

In his most recent memo, coming days after Zuckerberg’s announcement, Sandler barely speaks of the radical shift. Instead, he focuses on and sees promise in a “Facebook Coin,” or Facebook’s venture into blockchain and cryptocurrency. Sandler believes “any attempt to build out revenue streams outside of Advertising, especially those that don’t abuse user privacy, are likely to be very well received by FB shareholders,” with a new payments platform being a good strategy.

He says that “if Facebook proves successful in reinvigorating FB’s micro-payment strategy for digital content distribution, we see as much as $19B in additional revenue in our ‘upside case’ by 2021. Google Play generates over $6 in “net” revenue per user today, and our upside case assumes Facebook could see a similar cadence across its 2.9B unduplicated users in 2021. More conservatively, FB itself generated $0.80 in global payment ARPU under its previous micro-payment model back in 2012, if we apply that to the user base in 2021, we see a base-case of an incremental $3B in revenue.”

Though a micropayment platform could help generate significant revenue for the company, it doesn’t come without challenges. Sandler says, the company must demonstrate “a value prop for users above what is available today in payments,” while “trust issues after 2018’s problems” will remain a hurdle. Furthermore, as Facebook is a global social network, “a global payments system brings additional regulatory scrutiny.”

Overall, Wall Street’s confidence backing the social giant is strong, with TipRanks analytics showcasing FB as a Strong Buy. Based on 40 analysts polled in the last 3 months, 34 are bullish on FB stock, 4 remain sidelined and 2 are bearish. The 12-month average price target stands at $$192.08, marking a nearly 10% upside from where the stock is currently trading. (Get TipRanks’ free stock analysis report on FB)

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