Facebook to soar 26% on e-commerce, advertising strength, says BofA

• Bank of America maintained its price target for Facebook at $345 on Monday, implying a potential 26% climb for the social media giant.
• Analyst Justin Post expects the company’s e-commerce strength to drive strong year-over-year quarterly revenue growth.
• New features like Facebook Shops and Instagram Checkout are expected to bolster results going forward.
• Watch Facebook trade live here.

Facebook’s e-commerce push and increased advertising revenue will bolster the social media giant’s upcoming quarterly earnings report, Bank of America analysts say.

BofA maintained its “buy” rating and its $345 price target for Facebook on Monday despite concerns about antitrust lawsuits and increased regulation from a new presidential administration.

The $345 per share figure represents a potential 26% increase over current share prices of around $273 per share.

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Facebook underperformed in 2020-rising just 33% on the year versus 44% for the NASDAQ-as regulatory concerns outweighed the company’s accelerating advertising revenues.

Still, BofA Analyst Justin Post sees the company outperforming going forward. Post lauded Facebook's new eCommerce push as the solution to revenue woes in the near term in a Monday note to clients.

Facebook Shops and Instagram Checkout continue to outperform in their first year of operation.

Post cited Facebook Watch, the company's new streaming platform, and VR sales as drivers of forward momentum in the medium term.

In the long term, Facebook's under-monetized assets like Messenger and Watch will buoy the social media giant, which means the company deserves a strong valuation, according to BofA analysts.

"We think a premium P/E to the market is warranted given that several potentially under-monetized FB assets (Messenger, Watch, Marketplaces, WhatsApp) that can drive above-market revenue growth over the next 3-5 years," said Post in a note to clients.

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With close to 4 billion combined users for messaging apps WhatsApp and Facebook Messenger, the company still has considerable assets to monetize in the messaging space alone.

However, Bank of America also warned antitrust complaints and section 230 related changes might slow growth in the second half of 2021.

Additionally, President Biden has proposed raising the corporate tax rate to 28% from the current 21%, which could affect profitable enterprises like Facebook.

Facebook traded at $273.25 per share on Monday at 10:58 am EST, down about 0.5% on the day.