Video Ads, Oculus Bode Well For Facebook Shareholders, Axiom Says

In a report published Wednesday, Axiom analyst Victor Anthony maintained a Buy rating and $105 price target on Facebook Inc FB. The analyst believes that the company should be seen as a "global media communications platform" rather just a "social media company."

The analyst believes that there is meaningful growth potential for the core Facebook site, driven by improvements in measurement and targeting, apart from auto-play video ads, FAN, Atlas, LiveRail and the recently expanded Buy button.

According to the Axiom report, "Our checks with ad agencies suggest an increasing level of comfort with advertising on Facebook. Both brands and direct response advertisers are shifting budgets to Facebook, with some of that shift starting to come from search."

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Recent management announcement regarding expansion of ads on Instagram, along with the launch of Instagram API and targeting of ads, suggests that the company is making progress of fully monetizing the platform. The analyst expects Instagram to generate almost $1 billion in revenues in 2017, while also mentioning that this estimate could prove conservative.

The analyst also expresses optimism regarding the potential for monetizing the WhatsApp and Messenger platforms, through advertising, commerce, gaming and payments. Oculus, on the other hand, announced a new consumer version, called Rift, which is scheduled to be launched in 1Q16.

"Early reviews from users who have tried the consumer unit have been very positive and Oculus is committed to providing the best virtual reality experience on the market. We own and have tested the second-generation developer's headset (DK2) and see enormous use cases beyond immersive gaming such as for entertainment, commerce, and communication. Advertising could also be a longer-term opportunity," Anthony added.

However, the stock has only risen 3.4 percent year-to-date. The analyst believes that the coming nine months could bring in several catalysts to the stock, such as Instagram monetization and video ads being ramped and the launch of Rift.