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Will Libra lift Facebook's share price?



Facebook's [FB] eagerly anticipated cryptocurrency, Libra, has signed up to some of the biggest names in technology as partners, with Paypal [PYPL], Uber [UBER], eBay [EBAY], Visa [V] and Spotify [SPOT] all seeing the potential. However, one Libra partner – Mastercard [MA] – is already putting together its own cryptocurrency team, which begs the question of whether Libra will soon be swamped with competition from other mainstream companies – including those that do not have the same privacy concerns.

Mastercard's move to establish a crypto team of pre-empts a likely evolution in the payment industry as technology continues to penetrate the financial world. Ted Rossman of CreditCards.com said Mastercard “wants to be known as more than a card company; it wants to be a technology company ”.

Mastercard Senior Vice President Seth Eisen meanwhile told the New York Post, which broke the story that "looking at" blockchain and cryptocurrencies is part of finding new ways to add value to customers.

Mastercard's move will undoubtedly be seen as a wider signal that crypto is going mainstream, which could generate further bullish sentiment for bitcoin. The recent rally in bitcoin value was widely seen as a result of Facebook's Libra announcement.

Crypto race

Facebook could also soon see competition from Apple [AAPL], which signaled a move into crypto in early June when it unveiled a new "cryptographic" developer tool.

For Facebook, the ability for Libra payments to be made across Facebook, WhatsApp and Instagram, as well as services like Uber and Spotify, is a compelling offer; the key will now be how fast adoption can spread through its users and beyond.

When Facebook officially announced the planned Q1 2020 launch of Libra on June 18, cryptocurrency sceptics were quick to point out the obstacles in making it a success. Working collaboratively with the deeply entrenched and rigid regulatory minefield that governs global finance could prove the most significant.

Market cap$ 527.111bn
PE ratio (TTM)31.25
EPS (TTM)5.91
Quarterly Revenue Growth (YoY)27.60%

Facebook share price vitals, Yahoo Finance, 21 August 2019

High scrutiny

And Libra is already being attacked by regulators and lawmakers across the US and Europe. While EU antitrust regulators have already launched a probe, one US lawmaker – Brad Sherman – called the announcement "worse than 9/11".

Maxine Waters, chair of Congress' House Financial Services Committee, meanwhile said in a statement: "Facebook's plans raise serious privacy, trade, national security, and monetary policy concerns, not only for Facebook's over 2 billion users who will have immediate access to these products, but also to consumers, investors and the global economy. ”

"Facebook's plans raise serious privacy, trade, national security, and monetary policy concerns, not only for Facebook's over 2 billion users who will have immediate access to these products, but also for consumers, investors and the global economy" – Congress chair 'House Financial Services Committee, Maxine Waters

Analysts positivity

For the time being, Libra seems to be the only bolstering analysts' views on Facebook. In the month following the announcement, Facebook's share price rose more than 5%, and while it is trading slightly below pre-announcement levels, most analysts agree it is set for a rally.

Of the 44 analysts tracked by Market Beat, 41 have a buy rating and three have a hold rating, with a consensus target price of $ 222, representing a 21% upside from its August 20 price.

Worth noting that this is the first time Facebook has looked to launch its own currency. The firm first tried to introduce Facebook Credit exclusively for users back in 2010, an idea that was withdrawn after just two years.

Almost a decade later, it seems that technology may be there to make it go, but it remains to be seen just how many competing tech and payment companies will do the same.


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