Facebook Stock is suffering from Apple’s changes. The concern is probably overdone.

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Apple

and

Facebook

may not appear to be rivals at first glance. Apple’s vast treasure stems from its best-selling iPhones, and Facebook, after all, makes social networking apps.

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

Beyond competition in messaging apps – Apple has iMessage and Facebook makes WhatsApp and Messenger – Facebook has also challenged an upcoming change to iOS that will make it harder for Facebook to target ads. In theory, at least, that would make them less valuable.

Called the Advertiser Identifier, or IDFA, the technology allows developers of applications like Facebook to track people’s activity. Users must now unsubscribe if they do not want their activity to be tracked. Apple plans to change that in the coming weeks, preventing tracking unless people sign up, and Facebook doesn’t like it very much.

The changes to iOS were supposed to be implemented last year, but Apple postponed them until 2021. Among other factors, the potential impact of IDFA weighed on Facebook’s share price, which fell. 2.3% over the past six months, compared to

S&P 500

index gain of 15%.

Atlantic Equities analyst James Cordwell wrote in a client note on Monday that investors had already factored in the change in IDFA’s share price, and there was still plenty of room to develop the company. Cordwell acknowledged that there would be short-term uncertainty for Facebook and damage to revenue. In the longer term, however, Apple’s move to IDFA could boost Facebook’s business.

“The likely degradation of targeting / metering in the ‘open’ iOS / App Store ecosystem will increase the attractiveness of ‘closed’ content platforms for advertisers and app developers, with Facebook in the best position to reap the benefits. gone given its investments in stores and (to a lesser extent) Instant Games, ”the analyst wrote.

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

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

Cordwell assesses the overweight in Facebook stocks and has a target of $ 345 for the share price. Facebook shares rose 34% last year, with the S&P 500 index advancing 17%. Facebook closed the regular session Monday down 0.5% to $ 260.33.

Write to Max A. Cherney at [email protected]