Facebook (FB) stock, after posting 34% gains in the last year, is flirting with all-time highs, just a few bucks below $100.
Over that time, I’ve repeatedly touted the stock as a strong buy, citing its ambitions in virtual reality, the growth and monetization of Instagram, the growing popularity of Facebook videos, and much, much more along the way. But, there’s a hidden catalyst for FB stock few on Wall Street or Main Street pay lip service to: the potential to rake in BILLIONS from e-commerce.
Yesterday, news broke that FB was testing a “Buy & Sell” button in Sydney, Australia and Auckland, New Zealand. The feature allows users to list items for sale and scour for products for sale in their local area. It’ an awful lot like Craigslist…but if it’s popular, you’d better believe Facebook will change it to be more like eBay (EBAY).
But, merely speculating that Facebook could develop an eBay-like service isn’t the only reason e-commerce is the “hidden catalyst” for FB stock.
Facebook Is Making Moves
Let’s take a step back and look at the other e-commerce initiatives FB is working on.
The Menlo Park, California-based Facebook began testing the long-anticipated buy button in Facebook Pages just last month, taking another step toward turning brand Pages — an increasingly important part of companies’ online footprint — into a shopping destination. Eventually, Facebook could make a fortune by taking a percentage of sales that originated on its platform; if successful, the upside for FB stock would be enormous.
Facebook isn’t the only internet company pivoting into e-commerce. Pinterest, Twitter (TWTR) and Google (GOOG, GOOGL) are all also in the nascent stages of doubling down on e-commerce with buy buttons.
On top of that, FB is increasingly taking steps to compete with — and ultimately crush — Yelp (YELP). In January it began testing Facebook Place Tips, which scans businesses nearby mobile users and returns photos and posts by friends about those places.
Facebook also started listing business hours on Pages, and by integrating Priceline‘s (PCLN) OpenTable platform, users can even make restaurant reservations via FB.
But, that’s not all.
In moves that could ultimately challenge Paypal‘s (PYPL) dominance in the mobile payments space, you can now transfer money via Facebook Messenger and WhatsApp. To give you an idea about what that could mean for FB stock, last year PayPal hauled in revenue of $7.9 billion — or 63% of Facebook’s $12.5 billion in revenue last year.
If Facebook’s marketplace efforts ever take off, eBay showed how lucrative that business could be. Last year, eBay Marketplaces alone (which doesn’t include PayPal numbers) boasted $8.8 billion in revenue, or 70% of Facebook’s 2014 revenue.
Bottom Line
I’m really impressed with the recent advertiser-focused initiatives on Instagram and Facebook Video, and the long-term potential of Oculus is also exciting. But, the baby steps Facebook is taking in e-commerce are all too often overlooked. If, in the next few years, that turns into a trot, there’s no doubt that FB stock will continue to run higher.
As of this writing, John Divine was long PYPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
