Raymond James Maintains Outperform On Facebook, Expects Strong Ad Growth At Instagram

In a report published Monday, Raymond James analyst Aaron Kessler maintained an Outperform rating on

, with a price target of $90. Early last week, Facebook had announced its updated plans to monetize Instagram, including "expanding to action-oriented ad formats, enabling more targeting, and opening the platform up to advertisers of all sizes." Although there has been limited monetization so far, Instagram is focused on a select group of brands, which should support the initiatives to accelerate growth, given "the expanded advertiser base, improved targeting, and shift to more direct response ads (which drove a significant acceleration in core Facebook in 2013)," Kessler said. Instagram has more than 300 million monthly users and 200 million daily users as of 1Q. Given this large scale and attractive demographics, Kessler expects Instagram inventory to be "in high demand from advertisers." In the report Raymond James noted, "…our recent discussions with a leading Facebook marketing partner indicated significant early client interest since Instagram announced the broader advertiser rollout on Monday. The Instagram announcement increases our confidence in our estimates and Facebook's ability to expand from a single platform to multiplatform suite (Facebook, Instagram, Messenger, WhatsApp, Oculus). Kessler expects Instagram revenue to reach about $500 million in 2015 and grow to $1.1 billion in 2016 and $2 billion in 2017.