Sundar Pichai, CEO of Google, speaks on stage during the annual Google I / O Developer Conference on May 8, 2018 in Mountain View, California.
Stephen Lam | Reuters
Bank of America analysts said in a statement Wednesday that Alphabet shares will benefit more than online ad peer Facebook as the world recovers and emerges from stalemates as the vaccine continues to roll out in the first half of 2021.
The note outlined the outlook for key online media stocks like Google, Facebook, Twitter, Snap, and Pinterest in 2021 by Alphabet. Factors like the vaccine, regulatory changes, and Apple’s Identifier for Advertisers (IDFA) privacy change affect businesses differently.
Bank of America said in 2021 we would “move back to services from goods, to private from public, and to personal from virtual”. The analysts positively assess stocks that experienced the greatest growth pressures in Q3 2020 and those that will benefit the most from an economic reopening.
Bank of America analysts said Alphabet will be a “better” vaccine recovery stock “than Facebook in the first half of 2021. They argued Alphabet left its FANG counterparts behind in 2020 and should take advantage of accelerating the rate See search growth as a vertical industry depressed – like travel and local entertainment – rebound.
YouTube ad revenue is expected to increase as shopping tools get more complex. This includes tools for adding product images under ads that drive traffic straight to brands’ product pages.
“Google has a broader advertiser base than some of its social counterparts and saw a stronger slowdown in ad growth in the second quarter,” the analysts write. “We believe that exposure to travel (around 10%) and other local activities (including retailers and local businesses) could account for over 30% of search advertising revenue and those sectors could return in 2021.”
According to analysts, Facebook has undermined growth drivers like messaging, shopping, reels, and augmented reality / virtual reality, but the timing of increasing sales visibility and expansion in these areas is less certain than restoring search.
“If Facebook makes significant progress in purchasing initiatives, we believe the stock could achieve a stronger performance in the second half of 21,” the statement said.
As part of government scrutiny, analysts believe the ongoing cases against Facebook and Google will overhang the stock, but the fundamentals of their business will play a bigger role in 2021.
“Both companies will likely make every effort to regulate their core business practices or to break the company up in court,” the statement said. “Our calls from legal experts revealed that Facebook has some solid defenses against regulatory action, including the fact that Instagram and WhatsApp were pretty insignificant platforms at the time of the acquisition. For Google, we see distribution deals as less important for finding traffic at Stadium in corporate development. ”
Apple’s upcoming IDFA privacy statement, due to go into effect this year, will have an impact on advertising. Bank of America analysts said Facebook and Snap are the most at risk of the changes, potentially creating a 3% headwind for Facebook and a 5% headwind for Snap.
They argue that Twitter has modest exposure to mobile app downloads, but the exposure is relatively low compared to Facebook and Snap. Pinterest and Google are the least exposed to IDFA, they said.
For middle-cap players, analysts see Twitter as the most positive of its competitors in the first half of 2021. They said Twitter stock has the most negative sentiment and is best positioned to benefit from a return in branding and live events spending and product launches in 2021.
According to Bank of America, Snap’s messaging functionality will help keep users from leaving the ship in favor of TikTok. However, analysts warn that TikTok may compete for more professional content and, given the growing ad business, given the demographic overlap, it may fetch more attractive prices.
Analysts also examined the marketer boycotts on ad spend earlier this year, which they found didn’t have a big impact on Facebook’s growth in Q2 or Q3 2020.
“But advertisers seemed to be stepping up their dialogue with Snap and Pinterest, which had less controversial content,” they wrote. “Looking ahead to 2021, Facebook and Twitter have the greatest uncertainty and risk from additional issues related to user content as users focus on content. Snap and Pinterest can continue to benefit from the diversification of ad spend. Advertisers plan their spending for the year 2021. ”