If the crypto bubble bursts, don’t tell Facebook (FB).
The social network giant is expected to launch its own cryptocurrency tomorrow, which it hopes will serve as a type of global currency and be used as a peer-to-peer payment system by users across the world. CEO Mark Zuckerberg wrote about crypto in his mission statement last year and tasked former PayPal president David Marcus to lead its blockchain research unit, so the impending announcement won’t come as much of a surprise.
Ahead of the launch, RBC’s Mark Mahaney maintains his Outperform rating on FB stock, with $250 price target, which implies nearly 34% upside from current levels.
As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Mark Mahaney has a yearly average return of 23.5% and a 65% success rate. Mahaney is ranked #37 out of 5,196 analysts.
Though cryptocurrency’s bubble burst last year, Mahaney believes this is a big opportunity for Facebook. He says, ”this may prove to be one of the most important initiatives in the history of the company to unlock new engagement and revenue streams,” as it could lead to massive revenue as the company facilitates payments, commerce, and gaming.
Mahaney believes it is a “multi-step process, starting with a focus on user engagement through messaging and leading to further monetization with each subsequent, deeper step.” The analyst says there is a “vast opportunity for [peer-to-peer] payments in emerging markets subject to high/hyper-inflation and government instability,” with Facebook having about 1 billion monthly active users in these markets.
Regarding the cryptocurrency’s opportunity in online, Mahaney thinks “Facebook’s massive international scale provides an instant network for consumers and merchants to transact using a stable token with several benefits that crypto delivers such as near-instantaneous transactions with limited consumer ‘custody’ roadblocks.” This would give users the ability to seamlessly and safely purchase through Facebook, without worrying about fraud or potential dangers.
Mahaney sees value in Facebook’s “recent shift in focus to combining its messaging platforms.” The analyst says the move “was structurally designed to unlock Facebook’s crypto opportunity,” with “higher engagement in p2p payments and merchant commerce on Facebook’s platform may [provide] an opportunity to disintermediate the 30% take rate on Apple’s iOS & Google’s Android mobile.”
All in all, Facebook continues to be one of Wall Street’s favorite stocks. TipRanks analysis of 38 analysts shows a consensus Strong Buy, with 35 of analysts rating Facebook stock a Buy and three remain sidelined with Hold ratings. The average price target among these analysts stand at $222.03, which represents nearly 20% upside from current levels. (Click here to see FB’s ratings and price targets on TipRanks)