Facebook’s stock is affected by Apple’s changes. The concern is probably exaggerated.

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Apple

and

Facebook

they may not appear as rivals at first sight. Apple’s vast accumulation of money comes from its successful iPhones, and Facebook, after all, is creating social networking applications.

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

Beyond the competition in messaging apps – Apple has iMessage, and Facebook is creating WhatsApp and Messenger – Facebook has also taken issue with a future change to iOS, which will make it more difficult for Facebook to target ads. In theory, at least, that would make them less valuable.

Called the identifier for advertisers or IDFA, the technology allows developers of applications such as Facebook to track people’s activity. Now, people have to give up if they don’t want their work to be pursued. Apple plans to change that in the coming weeks by preventing tracking, unless people opt in and Facebook doesn’t like it very much.

The changes to iOS were supposed to be implemented last year, but Apple postponed it until 2021. Among other factors, the potential impact of IDFA weighed on Facebook’s share price, which has fallen 2.3% in the last six Monday compared to

S&P 500

15% index gain.

James Cordwell, an analyst at Atlantic Equities, wrote in a client note on Monday that investors have already considered changing the IDFA in the share price and that there is still enough room to expand the company. Cordwell acknowledged that there will be short-term uncertainty for Facebook and some revenue damage. In the long run, however, Apple’s move to IDFA could strengthen Facebook’s business.

“The likely degradation of targeting / measurement in the ‘open’ iOS / App Store ecosystem will increase the attractiveness of ‘closed’ content platforms for advertisers and app developers, with Facebook best positioned to capitalize on this, given the investment its in stores and (to a lesser extent) Instant Games, ”the analyst wrote.

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

Cordwell is optimistic about Facebook and other reasons. In the note, he wrote that the company has increased its active advertising base by more than 25% in fiscal year 2020, while saying that its store function, which offers e-commerce capability, is likely to generate higher revenue in second half of this year. Meanwhile, Instagram’s Reels feature gives the company exposure to popularized short videos from services like 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 headphones.

Cordwell values ​​overweight Facebook shares and has a $ 345 target for the share price. Facebook shares have gained 34% in the last year, as the S&P 500 index has advanced 17%. Facebook closed the regular session on Monday down 0.5% to $ 260.33.

Write to Max A. Cherney at [email protected]