Yes, There’s Hope for Facebook (FB) Stock. Really.


Facebook (FB) has had its worst year since its initial public offering, as allegations of data misuse continue to plague the company. Those allegations have contributed to a decline in the company’s stock price of nearly 25%.

Is there a light at the end of the tunnel for the social media giant?

Deutsche Bank’s Lloyd Walmsley points to Facebook Watch metrics, which he says could be FB’s way out from the “doldrums.” The bullish analyst says this is just the positive news the company needs in a time where recent headlines have been negative. Walmsley offers a Buy rating and price target of $195 for FB stock, which shows a potential upside of around 35% from current levels. (To watch Walmsley’s track record, click here)

Facebook Watch was rolled out in August of 2017 and offers people video content on-demand, from short clips you might have seen someone share on their Facebook page as well as original web series. 400 million monthly active users are spending at least one minute on Watch (higher than Walmsley’s expectations) and 75 million daily active users spend more than 20 minutes on Watch, which is up from 50 million DAUs, according to Head of Video, Fidji Simo. The analyst expects Watch engagement will increase, referencing a company announcement stating more users are watching the content and for longer stretches of time — especially since Watch became available on desktops and Facebook Lite in August of 2018 (a year after its birth).

“We have been assuming Facebook Watch was seeing limited traction and today’s blog post gives us renewed optimism in Facebook’s video opportunity, particularly given the company has not yet acquired any tent-pole content despite reportedly bidding over $600M for Indian Premier League Cricket. If the company can monetize time at $0.03 per hour (in line with how we model YouTube monetization), just the watch time on today’s 75M DAUs could equate to a ~$275M annualized business, and we expect to see considerable growth in engagement as the company invests here,” Walmsley suggests.

The company has been pushing for Facebook Watch to become a social activity and FB data shows there have been more than 12 million Watch parties in groups, along with 8 times the amount of comments than when consumers watch regular videos in groups. A Watch party is where one person hosts from his or her computer online, showing a live screening of a pre-recorded video (that’s on Facebook) and invites Facebook friends to watch it at the same time while commenting. This is in order to make it more like a community viewing.

Other analysts are encouraged when it comes to Facebook stock as well. Out of 38 who are checking in with FB stock, 31 are bullish, 6 are sidelined and 1 is bearish. The consensus price target of $188.31, shows a potential upside of just about 40% from current levels. (See FB’s price targets and analyst ratings on TipRanks)

 

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