Robert S. Peck of SunTrust Robinson Humphrey reiterated a Buy rating on Facebook Inc FB, with a price target of $125.
“New data from a Kenshoo report on Mobile App Advertising Trends is supportive of our bullish stance on Facebook’s monetization potential for core News Feed as well as Instagram,” Peck mentioned.
Pricing Power
The report stated the ad spending had increased more than 150 percent during 4Q15, with installs rising almost 200 percent, driven by better conversions and stable CTRs. This is turn led to a decrease in CPI and an increase in ROIs.
“While price inflation hasn't occurred yet, we think the strong ROIs combined with improving targeting and analytics capabilities and app developers driving higher Life Time Value (LTV) should provide further “pricing power” (or uplift) for Facebook and Instagram,” Peck explained.
Future Growth
The analyst also believes that Facebook has multiple levers that could help drive future growth, including pricing power on core products, along with new revenue streams, ad product innovation and unmonetized products, such as WhatsApp and Messenger.
According to the SunTrust report, “The mobile app ad market is projected by Business Insider to reach $5.4B in 2016.”
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