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.

Here’s Another Reason to Buy Facebook (FB) Stock


For all the talk about breaking up Facebook (FB) for privacy and anti-competition reasons, Adidas gave the world a little reminder that marketing across Facebook platforms still works.

The European apparel giant has been one of 19 companies that Instagram has selected to beta test the new ability to sell in-app, and CEO Kasper Rorsted says the sportswear giant largely has Instagram to thank for the 40% jump in online sales in the first-quarter of the year. The ability to directly purchase a product on Instagram without leaving the app makes it more easy for the customer to complete the purchase, decreasing the chance they will abandon their cart — a major challenge in online retail. As e-commerce continues to evolve, some believe Instagram and social will play a major role going forward.

Deutsche analyst Lloyd Walmsley seems to be encouraged, as he maintains his Buy rating on Facebook stock with $220 price target. (To watch Walmsley’s track record, click here)

Walmley is encouraged by the early success of Instagram’s checkout tool. He cites Adidas CEO’s comments (“there is no doubt that Instagram did have a positive impact…what we’ll continue to see that when we take our 4D Futurecraft shoes through this channel, it does drive revenue”) as highlighting a “compelling use case for Instagram broadly around product launches.”

Beyond the launch of a new product, the analyst believes companies similar to Adidas can look to Instagram as a long-term partner. Instagram would be able facilitate “direct product sales via Instagram Checkout and similar features, (2) [drive] awareness of new product, some of which helps….and (3) potentially even [help drive] (paid) app installs for Adidas.”

E-commerce is a growing focus for Instagram and Facebook, and not limited to Adidas or similar brands. At Facebook’s recent F8 conference, the company showed off new shopping tools, including to soon be able to purchase products via influencer posts. eMarketer estimates there are more than 500k influencers on Instagram, so Walmley believe “this move will (1) expand the reach of Checkout, (2) help condition users to look to interact with posts for opportunities to shop, and (3) helps FB monetize influencer activity that heretofore carved FB out of the advertising sold by influencers themselves against their organic audience.”

On the surface, all looks fine at Facebook. The social media giant continues to perform at or better than expectations, and is launching innovative new products that eventually may decrease its dependency on ad revenue. But the company also faces major backlash, including from politicians, as well as co-founder Chris Hughes and venture capitalist (and early Facebook investor) Roger McNamee. The main concern is privacy and antitrust — the same thing that broke up Microsoft about two decades age.

But analysts are not too bothered by this. TipRanks analysis of 37 analysts shows a consensus Strong Buy, with 33 analysts rating Facebook stock a Buy, while four rate it a Hold. The average price target among these analysts stand at $219.81, which implies nearly 20% upside from current levels. (See FB’s price targets and analyst ratings on TipRanks)

 

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