Facebook's New Shopping Feature Lifts Stock To All-Time Highs

Facebook, Inc. FB launched a new e-commerce featured called "Shops" that could better position the company to compete against more established third-party e-commerce platforms.

Facebook said it's working closely with partners like Shopify Inc SHOP to better give small businesses the support they need.

BofA: Compete Against Amazon And Others

BofA Securities analyst Justin Post said Facebook's new shopping platform including checkout features like Instagram Checkout will better help the social media company diversify its content and functionality.

The new venture will also help brands better monetize their products, which implies Facebook would compete against Amazon.com, Inc. AMZN, eBay Inc EBAY and Etsy Inc ETSY.

Facebook's "visual nature" should blend well with "influencer-driven shopping," according to Post. As such, Facebook could notably improve its user monetization rate across both Facebook and Instagram in the new e-commerce vertical space.

It's difficult to model expectations for incremental revenue, but Post said $1.5 billion in incremental revenue for each 10% increase in e-commerce activity is a reasonable assumption.

Post maintains a Buy rating on Facebook's stock with a $240 price target.

Morgan Stanley: Multi-Billion Dollar Annual Opportunity

Morgan Stanley analyst Brian Nowak said consumer e-commerce trends are "moving in Facebook's direction," especially after shelter-in-place activity provided a lift to online buying. Over time, Facebook's new features could result in even broader "social shopping" across businesses and retailers of all shapes and sizes.

Monetization of Instagram's platform alone represents a potential $4 billion of yearly incremental ad revenue starting in 2021.

Nowak maintains at Overweight, $230 price target.

Tigress: 'Instant Success'

Tigress Financial Partners CIO Ivan Feinseth said Facebook will integrate artificial intelligence and product recognition technologies to identify manufacturers of products that are embedded in images and provide users with links to retailers. This should help the new e-commerce platform become an "instant success" and help drive incremental monetization of its "massive" user base.

"I believe further upside exists from current levels and continue to recommend purchase," he wrote.

4C: Ideal Timing

Facebook's expansion into online sales "couldn't have come at a better time," Aaron Goldman, the CMO of global insights company 4C, said in an e-mail. While the integration of content and commerce isn't a new concept, it accelerated throughout the COVID-19 pandemic.

Facebook is also well positioned as a middleman to satisfy the wants and needs of both consumers and brands. Consumers are looking for new entertainment and shopping options while brands are looking for new venues to target customers and lift their sales.

"Facebook Shops is the right play at the right time especially when you consider that it extends across the Facebook, Instagram, WhatsApp, and Messenger to the tune of 3 billion monthly users," according to Goldman.