Shares of Facebook (FB) are surging over 4% ahead of the highly anticipated release of a White Paper for its cryptocurrency project tomorrow.
The social media monster is expected to unveil plans for a stablecoin named "Libra" that can serve as a currency on Facebook properties and across the internet.
For those that are not familiar, a stablecoin is meant to represent steady value and avoid the volatility notorious with cryptocurrencies. Simply put, the coin is not subject to wild swings and allows the stability necessary to facilitate commercial transactions.
Libra will be backed by a number of major fiat currencies.
A number of technology, payments, eCommerce, crypto, and venture capital partners including PayPal, Visa, MasterCard, eBay, Uber, and Andressen Horowitz have all signed on to govern the project, which gives Libra considerable clout. This asserts FB’s status as the 800lb gorilla in the social media room as large players basically had no choice but to sign on because they didn't want to miss out on what could turn out to be the first widely adopted crypto currency. The project, which Facebook has tried to keep secret, is being run by former PayPal President and VP of Facebook Messenger David Marcus which bolsters its already backed clout.
RBC was out positive on the stock last week, noting that Libra "may prove to be one of the most important initiatives in the history of the company to unlock new engagement and revenue streams" within Payments, Commerce, and Applications/Gaming.
The focal driver to watch out for here is the potential to be a game changer in underbanked emerging markets. There's no doubt that Facebook's unrivaled scale means there is a massive long-term potential.
Libra is expected to launch next year.
Facebook continues to grow ancillary businesses and build upon its massive worldwide scale. The adoption of Libra gives them yet another lever to pull moving forward.
At the same time, it is important to note that US regulators pose a threat after the House Judiciary Committee announced a bipartisan investigation into competition in digital markets earlier this month. Gone are the days of Facebook acquiring social network rivals that pose a threat.
Last thing to note is that Facebook will report second quarter results in late July.
As it stands, the company has a ~$535 bln market cap and trades at ~26x EPS estimates for fiscal 2019 or ~20x fiscal 2020 estimates.
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