'Buy The Book' At Facebook, Deutsche Bank Proclaims

In a report published Wednesday, Deutsche Bank analyst Ross Sandler maintained a Buy rating and $100 price target on Facebook Inc FB. The recent increase in the share price is likely to have been driven by the positive outlook for Q2, as compared to the previous few quarters.

"We want to continue to own FB as we believe only a few of the many future opportunities are "priced in". We don't see the multiple expanding from here, but we could see meaningful upward estimate revision over the next 2-3 years as the family of apps outside of core FB start to monetize," Sandler stated.

The analyst believes that the consensus revenue expectations for Q2 might prove to be conservative, given that checks suggest strong performance. In addition, Instagram ads seem to be in high demand, although the company has been gradually allocating the ad inventory, which could lead to a slight muted revenue contribution.

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"We recently highlighted Messenger and WhatsApp at $9B-$10B in potential incremental revenue by 2020, little of which is "priced in", we think video ads and Instagram's revenue ramp up are pretty well documented and in consensus," the Deutsche Bank report said.

On the other hand, Facebook has been hiring aggressively this year, although the analyst expects expenses to slow down in Q3 and Q4, as the company begins to benefit from the three large acquisitions made in 2014. This is likely to bring about a decline in the rate of margin compression.

"The recent move in FB shares was on Instagram's increased monetization and anticipation of upside to 2Q, warranted in our view. From here new revenue opportunities outside of core newsfeed are likely to take FB shares higher," Sandler added.