Facebook-owned Instagram's efforts to make the platform a destination to shop for and purchase items has caused Deutsche Bank to become more bullish on the stock.
According to a report in CNBC, citing Deutsche Bank Analyst Lloyd Walmsley, the move to make it easier to shop on Instagram will boost monetization for the app.
“We think a more streamlined eCommerce experience on Instagram could add an incremental $10 [billion] of revenue in 2021, and we see ‘Checkout with Instagram’ as a key step toward unlocking this opportunity,” Walmsley said in a research note to investors Monday (April 1).
The analyst was referring to Checkout, Instagram's new feature that enables users to browse and purchase products from 23 participating U.S. brands. The analyst said Facebook is making this a priority and investing heavily in the feature. Walmsley predicted more brands and retailers will want to quickly add products, and said the momentum could result in a Facebook-owned standalone shopping app. The Wall Street firm has given Facebook a “buy” rating and has a $200 price target.
In March, Instagram rolled out a trial of a new shopping program in which users can shop and check out within the app. The image sharing social network is testing the program with more than 20 beauty and fashion brands that include direct-to-consumer (DTC) companies along with well-known companies. As it stands, users can swipe a product on Instagram to go to the vendor’s website to place an order. The new functionality will make shopping on Instagram easier. Instagram users can make in-app purchases from Adidas, Anastasia Beverly Hills, ColourPop, Huda Beauty, KKW Beauty, Kylie Cosmetics, Nike and Ouai Hair.
The positive call from Deutsche Bank will be welcome news to Facebook, which has been under intense scrutiny following data scandals and privacy breaches. The social media company is facing what could amount to a record fine from the Federal Trade Commission (FTC).