Goldman Sachs analyst Heather Bellini raised Facebook's (FB) price target to $250, citing the company's opportunity to increase the number of advertisers and spend per advertiser with its Shop and Checkout offerings. Following the announcement of Facebook Shops last month, Deutsche Bank analyst Lloyd Walmsley said it could be a $30B revenue opportunity for the social media giant.
SHOPS, CHECKOUT OPPORTUNITY: In a research note to investors on Tuesday morning, Goldman Sachs analyst Heather Bellini raised the firm's price target on Facebook to $250 from $220, while keeping a Buy rating on the shares. Noting that Facebook has "significant exposure" to small business, as its top 100 advertisers contribute less than 20% of its advertising revenue, the analyst said she sees Shops and Checkout as likely increasing the number of advertisers and spend per advertiser. Every 1M increase in advertisers - assuming Facebook's 2019 revenue per advertiser of about $9,000 - would equate to an additional $9B in potential revenue, she contended. Conversely, assuming the same 8M advertisers spend an incremental $1,000 on the platform would drive an additional $8B in potential Facebook revenue, Bellini added.
The analyst sees Facebook Shops as having the potential to become one of the de facto store fronts, especially for small businesses, which often lack the financial means and time to set up and manage a customized e-commerce solution. Further, she estimates that global e-commerce was only about 13% penetrated in 2019 and sees the potential for accelerated penetration post COVID-19.
SHOPS COULD BE $30B REVENUE OPPORTUNITY: Following the announcement of Facebook Shops last month, Deutsche Bank analyst Lloyd Walmsley told investors that he saw it as a "clear affirmation "of the importance of e-commerce to the company’s future growth. The deployment of more advanced e-commerce solutions "meaningfully" expands Facebook’s potential revenue opportunity, Walmsley contended. The analyst also argued that Facebook Shops, "in a simplistic bull case," could drive up to as much as a $30B revenue opportunity, across a combination of take-rate driven transactional and advertising revenue.
After Facebook announced Facebook Shops, Instagram Shop, live shopping, loyalty program integrations, and new commerce partnerships, Morgan Stanley analyst Brian Nowak said in a research note of his own that he sees the company's "social mall expansion" as a multi-billion-dollar annual opportunity for Facebook. The analyst believes consumer e-commerce behavior is moving in the company's direction and that these new offerings could lead to even broader social shopping, along with Facebook monetization.
PRICE ACTION: In morning trading, shares of Facebook have gained over 8% to $238.52.
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