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Why Facebook Stock Jumped on Thursday

By Daniel Sparks – Aug 6, 2020 at 3:26PM

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The social network's stock is getting some love following its launch of Instagram Reels.

What happened

Shares of Facebook (META -0.74%) jumped on Thursday, rising 5.8% as of 2:45 p.m. EDT.

The stocks' gain follows news on Wednesday that the social network is launching a TikTok competitor within its Instagram app. Given TikTok's success, investors are likely hoping the new feature will be a major catalyst for Instagram.

A chart showing a stock price moving higher.

Image source: Getty Images.

So what

On Wednesday, Facebook announced a TikTok-like viewing format within the Instagram app that it is calling Instagram Reels.

"Reels invites you to create fun videos to share with your friends or anyone on Instagram. Record and edit 15-second multi-clip videos with audio, effects, and new creative tools," the company said in a blog post about the new Instagram feature.

The growth stock's gain on Wednesday may also simply be building on momentum from a stronger-than-expected second-quarter update last week.

Now what

Facebook's launch of Reels comes as TikTok considers selling its U.S. operations to Microsoft. Citing national security concerns, President Donald Trump had threatened to ban TikTok, which is owned by the Chinese company ByteDance.

Facebook's launch of Reels, therefore, is good timing. Some users may be looking to shift some content away from TikTok given its uncertain future.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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