Facebook’s actions are being hampered by Apple’s changes. The concern is probably exaggerated.

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Apple

and

the Facebook

they may not seem rivals at first sight. Apple’s vast treasure trove of money comes from its successful iPhones, and Facebook, after all, makes social networking apps.

But they are rivals, at least according to Facebook CEO Mark Zuckerberg, who noted this during the company’s quarterly earnings conference call in January. He highlighted the concerns that Facebook (ticker: FB) had over Apple’s control (AAPL) over iOS software that powers its mobile devices.

In addition to competing in messaging apps – Apple has iMessage and Facebook does WhatsApp and Messenger – Facebook also questioned a future change in iOS that will make it harder for Facebook to target ads. In theory, at least, that would make them less valuable.

Called an identifier for advertisers, or IDFA, the technology allows application developers like Facebook to track people’s activity. People must now cancel if they do not want their activities to be tracked. Apple plans to change that in the coming weeks, avoiding tracking, unless people accept it, and Facebook doesn’t like that much.

The changes to iOS should have been implemented last year, but Apple postponed until 2021. Among other factors, the potential impact of IDFA weighed on Facebook’s stock price, which has dropped 2.3% in the last six months, compared to The

S&P 500

gain of 15%.

Atlantic Equities analyst James Cordwell wrote in a note to the client on Monday that investors have already incorporated the IDFA change in the stock price and there is still plenty of room to expand the company. Cordwell acknowledged that there would be short-term uncertainty for Facebook and some damage to revenue. In the long run, however, Apple’s move to IDFA could strengthen Facebook’s business.

“The likely degradation in segmentation / measurement in the ‘open’ ecosystem of the iOS / App Store will increase the attractiveness of ‘closed’ content platforms for advertisers and app developers, with Facebook better positioned to capitalize on that, given its investments in stores and to a lesser extent) Instant Games, ”wrote the analyst.

It is also possible that advertisers simply accept a lower return on money spent on advertising, because it would be difficult for many major brands and direct response advertisers to stop spending entirely, Cordwell wrote. Apple’s changes will continue to allow Facebook to collect and use data on its members’ behavior within the application’s boundaries, suggesting that the company will still have useful user profiles that can be applied to ad targeting.

Cordwell is also optimistic about Facebook for other reasons. In the note, he wrote that the company increased its active advertising base by more than 25% in fiscal 2020, while he said that its store function, which offers e-commerce capability, is expected to generate more revenue in the second half of this year. year. Instagram’s Reels feature, in turn, gives the company exposure to short videos that have become popular for services like Tik Tok, he said. And finally, he said, the company’s virtual and augmented reality efforts generally receive limited credit, despite the success of the company’s Quest headsets.

Cordwell classifies Facebook shares as Overweight and targets $ 345 for the stock price. Facebook shares rose 34% last year, while the S&P 500 index advanced 17%. Facebook closed Monday’s regular session down 0.5% to $ 260.33.

Write to Max A. Cherney at [email protected]