Facebook Inc (NASDAQ:FB) is walking into this new year on back of a rooted foundation of users and engagement, as well as strength in climbing ad pricing, as well as fired up power in Instagram- all growth drivers set and ready for more.
Merrill Lynch analyst Justin Post believes this social media titan is “fundamentally sound,” earning a solidified spot as a continual “top stock pick in the online advertising sector.”
In reaction, the analyst reiterates a Buy rating on FB stock while lifting the price target from $210 to $230, which implies a 22% upside from current levels. (To watch Post’s track record, click here)
Post notes, “We see ad pricing and Instagram as core ongoing drivers in 2018, while video and messaging traction could drive more optimism on 2019. While margin pressure is likely due to video investments, expectations have been reset, and we’re optimistic about underlying profit growth and upside potential in 2018.”
Whereas Video and Messenger present potential upside opportunities for 2018, the analyst likewise sees some “unknowns” and risks: “Facebook launched the Watch tab in 8/17, and premium content is an important potential driver of incremental time spent on Facebook. The unknown is if Facebook can leverage its large audience to capture additional time with longer-form premium content. Success would drive higher user engagement and incremental ad supply, while failure could raise questions on the future of Facebook usage growth. For Messenger, we expect measured ramps of home page ads and sponsored messages, and continue to see messaging in total (Messenger + WhatsApp) as a substantial $20bn long-term revenue opportunity.”
Ultimately, the positive catalysts offset the negative risks for this analyst, who is enticed to see what is to come this new year for the social media empire.
TipRanks illustrates a strong bullish analyst consensus placing their luck behind this social media darling, with 30 out of 31 analysts of the last 3 months rating a Buy on FB stock, and just 1 maintaining a Hold. The 12-month average price target stands at $215.79, boasting a nearly 15% upside from current levels.