Menu
Miss America 2015 is Miss New York Kira Kazantsev

Miss America 2015 is Miss New York Kira Kazantsev

Xbox 360 Holiday Bundles Revealed

Xbox 360 Holiday Bundles Revealed

Iggy Azalea Sex Tape Controversy Heats Up

Iggy Azalea Sex Tape Controversy Heats Up

Batman v Superman Director Reveals Movie Scene

Batman v Superman Director Reveals Movie Scene

Paris Hilton just bought the Cutest and Smallest Dog

Paris Hilton just bought the Cutest and Smallest Dog

Why One Analyst Says Facebook Stock Is Hot Despite Site's Dwindling Cool Factor

Jan 6 2014, 11:46am CST | by

Why One Analyst Says Facebook Stock Is Hot Despite Site's Dwindling Cool Factor
Photo Credit: Forbes
 
 

As parents and grandparents have joined the ranks of Facebook’s most active users, the site’s bread and butter — the teenage and Millennial sets — have increasingly turned their attention to sites like Snapchat, Vine and Twitter. After all, when dorky Uncle Larry starts “liking” all your pictures, what used to feel cool can suddenly feel passe. But according to one analyst from SunTrust, Facebook’s dwindling cool factor is hardly anything for investors to worry about.

In a research note released Monday morning, SunTrust analyst Robert Peck took a bullish stance on the company, reiterating Facebook’s “buyrating and raising its 2014 price target from $55 per share to $65 per share. Peck also revised Facebook’s fourth quarter earnings estimate, adjusting its expected revenue to $2.37 billion, up from $2.29 billion. Facebook said Monday that it will release its fourth quarter earnings after the market closes on January 29.

Peck said his bullish outlook is driven by five factors, including the monetization of Instagram, a better ad quality and the integration of mobile ads. As for claims that teens aren’t using the site? Peck sees less of a Myspace comparison than Google and Amazon analogies.

“[M]uch like how Google and Amazon aren’t necessarily considered “cool” anymore, teens and older people still use those platforms due to their utility,” he said, noting that because users share “life events” on Facebook there is an air of permanence and a true community platform. “Will teens begin to use it more as community matters more once they separate from friends physically? As long as Facebook continues to innovate and invest in new functionality, we see no reason why they wouldn’t.”

A recent Pew study found that 63% of adults visit Facebook on a daily basis, and 40% of that group visits the site multiple times a day. Peck said that this type of activity level lends further credence to the idea that Facebook is a utility and not just a hot trend. Furthermore, he said, the number of users visiting Instagram on a monthly basis (150 million as of Facebook’s third quarter earnings report) could translate into significant amounts of money.

“Assuming Facebook shows 2 ads per visit, we calculated ~63 billion total impressions the company could sell in 2014. At an effective [cost per impression] of $2.50, we calculate over $150 million of incremental revenue in 2014, growing to almost $700 million in 2017,” Peck wrote.

Indeed, results from an early trial of Instagram ads were positive: Ben & Jerry’s reached 9.8 million 18 to 34 year-olds in 8 days, while an Instagram Levi’s ad reached 7.4 million 18 to 34 year-olds over the course of 9 days. Control groups for both ads revealed double-digit increases in brand recall.

For its near-term, fourth-quarter revenue prediction, Peck said that the $2.4 billion revenue estimate is split between payment revenues of $242 million (which would mark a 5% year-over-year decline) and ad revenues of $2.13 billion, a 60% year-over-year increase. While the accuracy of Peck’s prediction will come to light when Facebook reports its fourth quarter results on the 29th, Peck’s recent track record is pretty good: he was the first to set a public price target for Twitter, setting a bullish $50 per share target when the company itself said shares were worth a little over $20 a pop. Today, Twitter is trading for $64.72 per share, a 53.7% gain since its November 7, 2013 stock market debut.

Following the release of Peck’s report, shares of Facebook were up 2.3% in Monday morning trading. The stock finished 2013 with 95.2% growth.

Source: Forbes

You Might Also Like

Updates

Shopping Deals

 
 
 

<a href="/latest_stories/all/all/31" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

 

Comments

blog comments powered by Disqus

Latest stories

Minnesota Vikings GM is keeping his Alternatives available
Minnesota Vikings GM is keeping his Alternatives available
The general manager of the Minnesota Vikings is keeping his alternatives available at all times as far as his player Adrian Peterson is concerned.
 
 
Elisabetta Canalis ties the knot with Brian Perri
Elisabetta Canalis ties the knot with Brian Perri
George Clooney’s ex, Elisabetta Canalis tied the knot with Brian Perri in Italy recently.
 
 
Sammy Watkins Shows Mettle In 29-10 Rout of Miami Dolphins
Sammy Watkins Shows Mettle In 29-10 Rout of Miami Dolphins
Buffalo Bills rookie wide receiver Sammy Watkins played through pain during his team's 29-10 win over the Miami Dolphins on Sept. 14 to register a one-touchdown, 117-yard performance.
 
 
Steve Spurrier Now 2nd All-time in SEC Coaching Victories
Steve Spurrier Now 2nd All-time in SEC Coaching Victories
South Carolina Gamecocks head football coach Steve Spurrier won his 201st game -- second-most all-time tied with Vince Dooley and one spot behind Paul "Bear" Bryant -- on Sept. 13 after his team beat the Georgia Bulldogs, 38-25.
 
 
 

About the Geek Mind

The “geek mind” is concerned with more than just the latest iPhone rumors, or which company will win the gaming console wars. I4U is concerned with more than just the latest photo shoot or other celebrity gossip.

The “geek mind” is concerned with life, in all its different forms and facets. The geek mind wants to know about societal and financial issues, both abroad and at home. If a Fortune 500 decides to raise their minimum wage, or any high priority news, the geek mind wants to know. The geek mind wants to know the top teams in the National Football League, or who’s likely to win the NBA Finals this coming year. The geek mind wants to know who the hottest new models are, or whether the newest blockbuster movie is worth seeing. The geek mind wants to know. The geek mind wants—needs—knowledge.

Read more about The Geek Mind.