Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Should Investors Buy Facebook (FB) Stock After Its Cryptocurrency Launch? Top Analyst Weighs In


With much fanfare but little surprise, Facebook (FB) announced a new cryptocurrency on Tuesday.

While crypto’s peak came last year, there is still significant hope that it will one day become the go-to currency for the world. Facebook wants to play a role in that — last year, CEO Mark Zuckerberg discussed crypto in his annual mission statement, with the company launching a blockchain research unit shortly thereafter. With the launch of Libra — that’s what Facebook is calling its coin — Facebook hopes to create a worldwide currency. The company sees this being used in commerce, which includes allowing users to send money to each other through Messenger or used for purchasing through retailers on Facebook.

While Facebook’s stock barely moved Tuesday, many on Wall Street are excited about this new growth opportunity for the company. One of them is Baird analyst Colin Sebastian who maintained his Outperform rating on Facebook stock with $215 price target.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Sebastian has a yearly average return of 26.8% and a 72% success rate. Sebastian is ranked #20 out of 5,201 analysts.

Cryptocurrency isn’t new, but prices have been unstable, and many roadblocks have prevented it from going mainstream. Sebastian says Facebook “addresses some of the largest barriers to mainstream cryptocurrency adoption,” including security, processing scale, and commercial utility. With two billion users and the ability to provide security and regulation, many see Facebook as the perfect platform for crypto to go mainstream.

Sebastian says the “initial focus of the Libra blockchain will be geared toward addressing financially underserved constituencies,” but he believes with time, “applications (and monetization) of the technology could be much broader…and help Facebook diversify its revenue streams beyond advertising.”

Facebook currently generates nearly all its revenue from advertising, so many have been looking for the company to diversify in the same manner that other internet companies have. With its crypto project, Facebook is doing just that. This has the potential to seriously drive revenue through transaction fees, with Facebook as the middleman between buyers and sellers.

All in all, the move to crypto is expected to make Facebook even more beloved on Wall Street. TipRanks analysis of 38 analysts shows analysts already view the company favorably — there is a consensus Strong Buy rating, with 35 of analysts rating the company a Buy and three Holding. There is an average price target of $220.19 on the stock, representing a 17% upside from current levels. (See FB’s price targets and analyst ratings on TipRanks)

 

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