You’ve got to hand it to the people at Facebook (NASDAQ:FB). They are masters at innovating and seizing the latest trends to capitalize on. The company’s ability to pivot keeps the company fresh, and keeps the profits flowing for FB stock.
So, is it any wonder that as the globe wrestles with the novel coronavirus, the global economy spirals into a recession and brick-and-mortar stores struggle, that Facebook jumps on the best opportunities to turn a profit in our new reality?
Of course not. It’s exactly what you’d expect from Mark Zuckerberg and Co.
Two innovative products Facebook rolled out this spring — Facebook Shops and Facebook Rooms — tie exactly into how people are spending their time and money in a post-pandemic world.
Not surprisingly, FB stock hit all-time highs last week.
Facebook Jumps Into the E-Commerce World
E-commerce stocks are all the rage right now. People have been unable or unwilling to venture out of their homes while protecting themselves from Covid-19. Many brick-and-mortar stores were closed to walk-in traffic this spring as the U.S. shut down in an attempt to flatten the curve of infections.
So, it only makes sense that Facebook launch its own e-commerce effort. In a blog post, Facebook announced on May 18 that it’s launching Facebook Shops to give users a “mobile-first shopping experience where businesses can easily create an online store on Facebook and Instagram for free.”
Facebook says it is working with partners, including Shopify, in the project.
Wall Street celebrated the move, with analysts at AB Bernstein saying that Facebook Shops opens a market that could be worth $1.3 trillion. “We have long viewed FB as the ‘rent’ to a digital economy and a core component of the online retail ecosystem,” they said in a note to clients.
At the same time, Deutsche Bank said that Facebook Shops could a big part of that market.
“We think Facebook Shop in a simplistic bull case could drive up to as much as a $30 [billion] revenue opportunity, across a combination of take-rate driven transactional and advertising revenue.”
Facebook Rooms Challenges Zoom
With millions of people working from home these days, there’s been a huge demand for video conferencing services.
Platforms offered by Zoom (NASDAQ:ZM), Microsoft (NASDAQ:MSFT) and Alphabet’s (NASDAQ:GOOG,NASDAQ:GOOGL) Google have been reporting spikes in usage. It’s been a big moneymaker, particularly for Zoom, which saw its stock jump more than 100% so far this year and is recording 300 million daily meeting participants.
Facebook recently launched Messenger Rooms across its platform. Messenger Rooms gives users a place to do video chats through Facebook or on its Messenger app for free.
And now Facebook is doubling down on that opportunity by launching Workplace Rooms. Workplace will directly compete with Zoom by offering a place for companies and work teams to collaborate.
Workplace is already competing with Slack (NYSE:WORK), the popular team communication platform used by many companies. Slack has a partnership with Microsoft to allow groups of team members to communicate by video.
Facebook’s Workplace Rooms is an effort to take on all those companies by offering a single platform. Facebook says Workplace has 5 million paid users already — an increase of 2 million since October. Facebook Work Groups boasts more than 20 million users just six months after the platform was launched.
And its no coincidence the Facebook’s Rooms uses the same “room” terminology as Zoom. While Zoom has been plagued with privacy issues and “zoombombing,” Facebook says its rooms can be locked by moderators and participants can be removed.
Of course, Facebook has its own privacy record to overcome before people can trust it completely.
The Bottom Line on FB Stock
Even without Facebook Rooms and Facebook shops, FB is a powerhouse. The number of daily active users increased by 11% last year, and monthly platform users grew to 2.6 billion people.
The company’s entrance into the e-commerce space opens new revenue streams that will make Facebook even bigger and stronger. It seems destined to be a viable competitor to Amazon, eBay and Etsy (NASDAQ:ETSY).
Because people are so familiar with its platforms, the Rooms rollouts will also drive users to Facebook. In turn, it will drive them away from competing platforms offered by Zoom, Microsoft and Alphabet. The more people that use Facebook’s offerings on a daily basis, the more advertising revenue the company can draw.
Facebook’s willingness to shift gears, its deep pockets and its ability to compete head-to-head in today’s changing world makes FB the ultimate growth stock.
FB stock has an A quantitative grade in my Portfolio Grader. It carries an overall B grade with a strong buy rating right now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.