Facebook shares are hurt by Apple’s changes. The concerns are likely exaggerated.

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Apple

and

Facebook

may not seem like rivals at first glance. Apple’s huge amount of money comes from its successful iPhones, and Facebook makes apps for social networking, after all.

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

In addition to the competition in messaging apps – Apple has iMessage and Facebook makes WhatsApp and Messenger – Facebook has also had a problem with an upcoming change to iOS that will make it harder for Facebook to target ads. In theory, this would make them less valuable.

The technology, called the Advertiser ID or IDFA, allows app developers like Facebook to track people’s activity. People must now opt out if they don’t want their activity tracked. Apple plans to change that in the coming weeks and prevent tracking unless people sign up, and Facebook doesn’t like it.

The changes to iOS should be rolled out last year, but Apple has delayed it to 2021. Among other factors, IDFA’s potential impact weighed on Facebook’s stock price, which has fallen 2.3% in the past six months, compared to the

S&P 500

index gain of 15%.

Atlantic Equities analyst James Cordwell wrote in a client note on Monday that investors have already incorporated the IDFA change in the stock price and that there is still plenty of room to expand the company. Cordwell acknowledged that there would be short-term uncertainty for Facebook and some damage to its revenue. In the longer term, however, Apple’s move to IDFA could bolster Facebook’s business.

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

It’s also possible that advertisers will simply accept a lower return on ad dollars spent because it would be difficult for many major brands and direct response advertisers to stop spending altogether, Cordwell wrote. Apple’s changes will allow Facebook to collect and use data on its members’ behavior within the boundaries of the app, suggesting that the company will still have actionable profiles of its users that can be applied to ad targeting.

Cordwell is optimistic about Facebook for other reasons as well. In the note, he wrote that the company has grown its active ad base by more than 25% in fiscal year 2020, while saying the shopping feature, which provides e-commerce opportunities, is likely to generate more revenue in the second half of this year . Instagram’s Reels feature, meanwhile, gives the company access to short video popularized by services such as Tik Tok, he said. And finally, he said, the company’s efforts in virtual reality and augmented reality often get little credit, despite the success of the company’s Quest headsets.

Cordwell rates Facebook stock as Overweight and has a price target of $ 345. Facebook stock is up 34% in the past year, while the S&P 500 index is up 17%. Facebook closed the regular session by 0.5% on Monday to $ 260.33.

Write to Max A. Cherney at [email protected]