The clock is ticking down on 2019, and you know what that means: It's time for Wall Street analysts to tempt fate, clamber out on limbs, and make predictions about what will happen in 2020.
Unable to overcome the temptation, Rosenblatt internet analyst Mark Zgutowicz joined the parade of prognosticators, with a few predictions about Facebook, Spotify, and Shopify, too. Here's what he had to say:
2019 saw presidential candidates Elizabeth Warren and Bernie Sanders (and even Facebook co-founder Chris Hughes) publicly call for breaking up Facebook to reduce its monopoly power in social networking -- but Zgutowicz doesn't think it will happen. Not in 2020, at least. What might happen under a Warren Administration is anybody's guess.
Why not? Zgutowicz quotes FTC Chairman Joseph Simons, who has publicly mused that justifying breaking up Facebook for alleged anti-competitive behavior might require the FTC to prove that, absent Facebook's acquisition of Instagram and/or WhatsApp, one or the other of those entities would eventually have "develop(ed) into something that actually could challenge the Facebook platform."
If predicting the future is hard, proving that something that never happened would have happened in an alternate timeline seems nigh on impossible. Accordingly, Zgutowicz's view is that concerns over Facebook's breakup will fade as 2020 progresses, allowing Facebook stock in 2020 to resume its historical average valuation of anywhere from 40% to 50% more than the S&P 500's P/E ratio. Hint: At 33 times earnings today, the stock's valued "only" about 35% higher than the rest of the index.
Zgutowicz rates FB stock a "buy" along with a $242 price target, which implies about 18% upside from current levels.
As the case with most tech companies, Wall Street is extremely optimistic on Facebook. Of 33 analyst ratings tracked by TipRanks, 29 are bullish on the social giant's stock, showing a consensus Strong Buy rating. The 33 analysts have an average price target of $237.70, which represents a 16% upside to the stock.
Citing "synergies" between the music and video businesses, as evidenced by Spotify's occasional promotions offering joint subscriptions to its own music offerings and Hulu's streaming video fare, Zgutowicz predicts we'll see Spotify seek out more such partnerships in the new year.
As the analyst points out, Spotify has "30M+ sticky US" paid subscribers -- and "nearly 120M" paying customers worldwide. That captive audience may prove irresistible to streaming video companies such as AT&T, YouTube, Netflix and others, leading them to approach Spotify and with offers to bundle their own video content with Spotify's music subscriptions -- benefitting both parties, and customers besides.
As such alliances bear fruit, Zgutowicz sees Spotify shares climbing more than 22% as the year progresses, ending at a target price of $184 per share.
Wall Street backs Zgutowicz's bullish bite into the music streaming giant. Out of 15 analysts polled by TipRanks in the last 3 months, 10 are bullish on Spotify stock, while 5 remain sideliend. With a return potential of nearly 11%, the stock's consensus target price stands at $166.40.
Another stock winning "buy" ratings from Rosenblatt is Shopify, which Zgutowicz assigns a price target of $481 a share. Although it's name sounds similar to Spotify, Shopify isn't in the music business, but rather in the business of helping small merchants open and operate storefronts on the internet.
Key to the company's success in 2020, says Zgutowicz, is the rollout of its Shopify Fulfillment Network (SFN), which aims to assist e-tailers in shipping goods to their customers by building out a network of fulfillment centers powered by machine learning algorithms to speed delivery. The analyst says there's "pent-up merchant demand" for this service which should help it to rocket out of the gate once it's up and running in late 2020.
Zgutowicz predicts that by year-end, 12% of Shopify's North American revenue will be coming from SFN, driving 21% gains for the stock. By 2025, this brand new service could be providing fully half of Shopify's revenues in this key geographic region -- so you can expect years of gains to follow a blockbuster year in 2020.
According to TipRanks, a company that tracks and measures the performance of analysts, the consensus on Wall Street is that SHOP stock is a “moderate buy” for investors. But TipRanks might as well have said “sell” — because analysts, on average, think the stock could slightly fall in the next few months.