Mon, 28 Sep 2020

Facebook shares climbed on Friday as concerns continued to ease over the prospect of greater regulatory scrutiny, and following a report detailing the company's plans to launch a digital currency.

The stock rose as much as 2.5% in morning trading, extending a recent uptrend. Shares of the social-networking company are on track for their eighth rise in the past nine trading days, and they are up more than 10% from a low earlier this month.

''Investors may be getting relatively comfortable with the underlying regulatory risk'' facing major Internet and technology stocks, wrote Youssef Squali, an analyst at SunTrust Robinson Humphrey. ''There may be a growing realisation that even in case of a breakup of these behemoths, the value of the parts may be higher than the whole over time.''

According to the firm's calculations, Facebook's five main businesses - the namesake social network, Instagram, Facebook Messenger, WhatsApp and Oculus - have a sum-of-the-parts valuation that implies a share price of $226, or 27% above Facebook's Thursday close.

SunTrust added that it was ''likely to take years'' for any regulatory measure to be implemented and enforced, but the commentary echoes an argument that has been repeatedly made about Google-parent Alphabet, which is also facing antitrust scrutiny.

New details also emerged on Friday concerning the company's plans to unveil a new cryptocurrency next week. The Wall Street Journal reported it had signed up a number of major companies - including Visa, Mastercard, PayPal and Uber - to back the project. The Financial Times also reported Facebook has hired UK bank lobbyist Ed Bowles as the company's director of public policy in anticipation of greater regulatory scrutiny in Europe over its plans for a digital coin.

Currently, 45 analysts recommend buying Facebook shares, while six have hold ratings on the stock and two recommend selling it. The average price target of about $220 represents upside of about 24%.

Earlier this week, MoffettNathanson upgraded its view on the stock, writing that ''improving underlying fundamentals'' and new growth opportunities would offset ''the risk of greater regulatory scrutiny.'' On Thursday, Deutsche Bank also wrote that Facebook's video-streaming service could grow to generate $5bn in annual ad revenue over the next few years.

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