Facebook (FB) Stock: There’s a New Bull in Town

There’s little doubt that Facebook (NASDAQ:FB) has plenty of fans on Wall Street. Now you can add a new one to the list. Nomura analyst Mark Kelley initiates coverage on FB with a Buy rating and price target of $228, suggesting the stock could advance about 12% in the coming year. (To watch Kelley’s track record, click here)

There is no question that Facebook is the global leader of social media, but with a peaking and stagnant user base on Facebook proper, particularly in the U.S., questions about future growth prospects remain. Kelley points out that there is tremendous potential ahead for Instagram and Messenger, which are in monetization infancy, as well as WhatsApp, which isn’t monetized at all.

Furthermore, bigger-picture industry questions about data privacy and use of data have and will likely continue to garner headlines in the near term, but Kelley doesn’t think the Cambridge Analytica issue and questions around privacy have been meaningful for Facebook’s traffic (or ad revenue), the impact of which will be fully embedded into 2Q18 numbers.

“In the near- to mid-term we are focused on video as the main driver across all components of the platform over the next 1-5 years, and believe that Messenger will start to contribute more meaningfully in about a year from now. WhatsApp monetization, when it comes, will be completely incremental to our current model (WhatsApp has yet to be monetized with 1.5 billion-plus active users). While the video growth and opportunity are clear positives, in our view, the nature of that business is margin-dilutive, particularly as professional content becomes a bigger part of the video story (55% of ad revenue is paid to content creators), and due to the substantial bandwidth differences between video and non-video content. We believe we have appropriately baked in the dilutive nature of the video advertising ramp,” Kelley wrote.

Out of the 27 analysts polled by TipRanks in the past 3 months, 25 are bullish on Facebook stock, while only 1 remains sidelined and one is bearish on the stock. With a return potential of 11%, the stock’s consensus target price stands at $226.08.

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