Facebook Still Has Multiple growth drivers
Facebook Inc (NASDAQ:FB) still has multiple growth drivers which can be leveraged to maintain its strong growth trajectory, in spite of the potential slowdown in ad load growth on the core platform. As per a recent Recode report, Facebook is testing out mid-roll ads, which should further help the company’s video ad revenue. Apart from the video ad efforts, increasing ad revenue from Instagram should also help offset the ‘ad load slowdown’ on the core platform. While Instagram and video ads are the next key drivers of Facebook’s growth, the company still has many potential growth drivers in the likes of Whatsapp and FB Messenger. Facebook’s multiple potential growth drivers have been cited in various recent analyst notes.
Doug Anmuth from JPMorgan recently picked FB as a ‘top large cap idea (1) for 2017′. As per a CNBC report, the analyst wrote, “In our view a number of concerns have contributed to the recent wall of worry including potential for meaningful revenue deceleration [and] slowing ad load growth,” analyst Doug Anmuth wrote in a note to clients Tuesday. “However, we believe these fears are largely overdone and continue to create a good buying opportunity. … [We reiterate] FB as our top large-cap pick.” Cowen and company upped their FB target price to $156 observing “video ad market strength and other positive indicators gleaned through a conducted ad survey.”
These bullish notes came on the back of positive commentary from Oppenheimer analyst Jason Helfstein, who recently picked Facebook stock as a top pick for 2017 (2), citing increased ad spending in Q4 2016 and the rapid growth of Instagram.
Putting It All Together
Facebook Inc (NASDAQ:FB) enters 2017 with a combination of lower expectations and depressed valuations. The strong earnings growth in 2016 has failed to have a similar impact on the FB stock price, as investors were spooked by growth concerns. However, Facebook’s multiple growth drivers, like Instagram and rising video ad revenue, should more than offset the slower growth on the core Facebook platform. With the FB growth story still intact, the depressed valuations position Facebook for a strong 2017. Any earnings surprises over the coming quarters should lead to a strong rally in FB stock price.
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