FB Stock Forecast: Why Facebook Launched A Unified Payment System

motek 1This FB stock forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • I reiterate the September 24 buy recommendation I made for Facebook. This company is using its social networking dominance to find new sources of revenue.
  • The recent launch of Facebook Pay is a long-term catalyst. It can make Facebook a key leader in mobile P2P payments and P2P commerce.
  • Facebook Pay will improve monetization from the 800 million-strong Facebook Marketplace P2P online commerce platform.
  • Mobile Peer-to-Peer payments are rapidly increasing in the United States. Industry watcher eMarketer estimates that U.S. mobile P2P transactions will hit $309.95 billion in 2019.

The recent launch of Facebook’s (FB) unified payments system for all of its mobile apps is another strong reason to go long on this leading advertising company. Facebook Pay is a seamless Peer-to-Peer (P2P) payments platform that works on Facebook, Messenger, Instagram, and WhatsApp. The more than 2 billion active users of all these apps can eventually make Facebook a leader in mobile P2P money transfer and e-commerce.

FB Stock Forecast
(Source: Facebook)

Getting more aggressive on P2P payments is a worthy expansion move for Facebook. In the U.S. alone, eMarketer estimates that mobile P2P payments’ transaction value will reach $309.95 billion in 2019. This amount will grow 27.9% to hit $396.48 billion by 2020. There are already over 69.2 million mobile P2P payments users in the U.S. My fearless forecast is that majority of them are also Facebook, Messenger, Instagram, and WhatsApp users.

On the global front, mobile Peer-to-Peer payments is being practiced by over 1 billion people. Advanced Market Analytics also estimate that the global P2P payments industry is growing at 9.76% CAGR. It will reportedly have a market valuation of $3.22 trillion by year 2024.

The Potential Economic Benefits of Facebook Pay

Facebook has compelling advantage against P2P payments/digital wallet PayPal (PYPL), Venmo, and Square’s (SQ) Cash App. Further, unlike Apple’s (AAPL) payment system, Facebook Pay’s addressable market is not limited to iOS devices. The device-agnostic design of Facebook Pay means it can flourish in any type of smartphone, PC, and tablet computer.

 It will be more convenient for daily active users of Facebook’s mobile app, Messenger, Instagram, and WhatsApp to just attached bank accounts or debit/credit cards to Facebook Pay and use that to shop online or send money to friends, relatives, and colleagues.

The impulsive purchase tug of mobile shopping is a strong reason for Facebook to leverage its more than 2 billion mobile app users to create its own unified mobile payments platform.  Offering its mobile users a seamless mobile payments system could help Facebook easily achieve annual payments transaction worth $100 billion to $200 billion. Guesstimating a net transaction fee of 0.5%, Facebook could generate $500 million to $1 billion in new non-advertising related annual revenue.  Corporate or single-proprietor merchants that’s going to sell their products on Facebook-own apps will also likely have to pay additional transaction fees to Facebook.

Going forward, Facebook Pay’s potential annual contribution could reach $2 billion during its first 2 to 3 years. Any expansion product/service that can generate more than a billion dollars annually should move FB’s stock price higher.

Becoming A Threat To Western Union

Facebook Pay will not only disrupt digital wallet companies like PayPal, Venmo, and Square. It will also emerge as a threat to Western Union’s (WU) dominance in global remittance (or cross-country money transfer). Many overseas workers (who likely are using Facebook-owned apps) will eventually shift to Facebook Pay as an alternative to Western Union or MoneyGram (MGI).

Processing remittances is a lucrative business. The World Bank estimated that 2018 saw $689 billion (up from 2017’s $633 billion) in global remittances. Taking just 10% of that opportunity can lead to Facebook Pay processing almost $70 billion in cross-country remittances.  Facebook can charge as high as 2% transaction in cross-country transfer and it will still be much cheaper than Western Union’s $10 per $100 fee.

Unified Payment Is Also Complementary To Facebook’s MarketPlace

Another reason why Facebook is going big on P2P payments is it likely wants to improve monetization from its 800-million strong MarketPlace e-commerce platform. Instead of merely being paid through promoted product placements/product search ads on MarketPlace, Facebook also wants the payments processing fees on completed MarketPlace transactions.  MarketPlace is a localized buy & sell platform hosted by Facebook. MarketPlace is available in more than 70 countries and it could give Facebook Pay instant global reach.

(Source: Facebook)

Everything under the sun is now available for sale on MarketPlace. Imagine just how lucrative it will be for Facebook Pay if 80 million people starts using it to buy cars, houses, and other pricey items. Even at 0.5% transaction fee, a $10,000 used car sold on MarketPlace can steer $500 to Facebook’s topline.

Anyone who wants to buy or sell new or used items/properties on MarketPlace will likely find it very convenient to use Facebook Pay as their default payments system. By using Facebook Pay, buyers and sellers alike gets fraud protection. Like PayPal and other digital wallet services, Facebook Pay can offer its commercial and personal users a refund policy should a dispute arises from a MarketPlace transaction.

Conclusion

Like what said last September 25, FB is a strong buy. This company will likely replicate its advertising success with its expanded Peer-to-Peer payments service. Facebook Pay has the potential to generate around $2 billion in new annual revenue. This can go significantly higher as Facebook Pay gets more adoption as a cheap way to do domestic/cross-country remittances. It is not far-fetched to say that Facebook can eventually generate $5 billion/year as a Business-to-Consumer e-commerce and P2P payments processor.

My buy rating for FB is backed by its super bullish one-year algorithmic market trend forecast score of 353.96. Go long on Facebook’s stock asap because the stock-picking AI of I Know First is very confident it will likely trade higher than $193.15 within the next 12 months.

FB Stock Forecast

A check on TipRanks also told me that the average 12-month PT for FB is $235.04. This stock is clearly seen as undervalued by many Wall Street analysts. Now is the time to go long on FB while it still trades below $200.

FB Stock Forecast
(Source: TipRanks)

Analysis of monthly technical indicators and moving averages also favor doing a buy on FB.

(Source: Investing.com)

Past Success With FB Stock Forecast

I Know First has been bullish on FB stock price in a past forecast. On January 29, 2019, the I Know First algorithm issued a bullish forecast for FB stock. The algorithm successfully forecasted the movement of the Facebook’s shares. Until today, FB’s shares have risen by 32.30% in line with the I Know First algorithm’s forecast. See chart below.

FB Stock Forecast

This bullish Facebook stock forecast was sent to the current I Know First subscribers on January 29, 2019.

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