Instagram, WhatsApp And Oculus Rift Keep Facebook's Long-Term Potential Robust

Robert "Bob" S. Peck of SunTrust Robinson Humphrey mentioned that in recent weeks, concerns have emerged regarding weakness is some of Facebook Inc FB verticals during the seasonally weak 1Q.

The analyst maintained a Buy rating on the company, with a price target of $125.

Investor Concerns

“While Facebook sits just below all-time highs, investor sensitivity to potential slowdowns in growth have increased as sentiment remains consensus long,” Peck stated.

However, the analyst also pointed out that industry conversations indicate that several of Facebook’s distribution partners expect Facebook to witness above consensus growth, quarter on quarter, with Instagram delivering strong year on year performance for the Core Facebook product.

Related Link: Is Facebook's "Culture Of Sharing" Drying Up?

Positive 1Q Trends

The analyst also noted that the company’s PMDs indicate that the quarter on quarter Ad revenue growth might be better than expected, driven by positive trends for new ad units and “incremental lift from Instagram.”

Peck expects Facebook to report 1Q ad revenue at $5.05 billion, representing 52 percent year-on-year growth.

“We believe Instagram's roll-out could conservatively drive >$1.5B revenue lift in 2016 and >$3B in 2017,” Peck mentioned.

The analyst expects expenses to continue to be high, given the potential for Live video content and technology, Oculus and expanding campus and data center needs.