Investors are rallying behind Facebook Inc (NASDAQ:FB) as internet advertising is hitting an inflection point. In terms of demand for video and mobile advertising, Facebook may be the core beneficiary of this inflection. The potential for growth and strong company fundamentals have created an environment for strong animal spirits in investors.
In terms of fundamentals, RBC Capital analyst Mark Mahaney stated, “FB’s fundamentals remain among the strongest in the sector, given our [estimate] for 50%+ organic Ad Rev growth in ‘15”. Mahaney reiterated a Buy rating on Facebook on June 15, believing that current valuation of Facebook is very attractive on a growth basis.
Mahaney has made 21 total ratings on Facebook since June 2013, earning an 83% success rate recommending the stock and an average return of +62.7% per FB rating. He currently has a 64% success rate recommending stocks and a +34.5% average return per recommendation.
The inflection point in internet advertising is creating an environment in which Facebook can be seen as a global media communications platform instead of just a social media company. This change is driven by improvements in measurement and targeting, auto-play video ads, FAN, Atlas, LiveRail, and the recently expanded Buy Button.
Facebook’s management team announced an expansion of advertisments on Instagram, progressing to fully monetizing the platform. Axiom analyst Victor Anthony reiterated a Buy rating on Facebook on June 17, making it clear that he expects “Instagram to generate almost $1 billion in revenues in 2017, while also mentioning that this estimate could prove conservative.”
Anthony has made a total of 34 ratings on Facebook since June 2013, earning a 97% success rate recommending the stock and an average return of +88.7% per FB recommendation. The analyst has an overall success rate of 69% recommending stocks and a +27.3% average return per recommendation.
In regards to Oculus VR, the leader in Virtual Reality Technology, early reviews indicate positive consumer sentiment. Facebook purchased the company in March of last year for $2 billion. Oculus is being advertised as a communications platform by making individuals feel truly present. Facebook CEO Mark Zuckerberg said in late March, “Imagine sharing not just moments with your friends online, but entire experiences and adventures.”
Nevertheless, the stock has only risen 3.4 percent year-to-date. Victor Anthony stated, “The coming nine months could bring in several catalysts to the stock, such as Instagram monetization and video ads being ramped and the launch of Rift.”
Out of 27 analysts polled by TipRanks, 25 analysts rate Facebook a Buy and 2 analysts rate the stock a Hold. The average 12-month price target on Facebook is $95.56, marking over a 16% potential upside from where the stock is currently trading. Overall, the top analyst consensus for Facebook is Strong Buy.