Facebook Still A Top Pick And Now Worth $101/Share, JMP Says

In a report published Thursday, JMP Securities analyst Ronald V. Josey reiterates an Outperform rating on Facebook, Inc. FB, while raising the price target from $98 to $101, following checks that suggests that the company continues to gain share of total advertising dollars. "On Instagram, we believe engagement and MAUs continue to ramp, that brands are increasingly adopting the platform, and that the evolution of Instagram's ad products and integration with Facebook's ad technology could lead to material revenue growth going forward," Josey stated. The analyst now expects Instagram to be able to generate close to $1.4 billion in revenues in 2016, up from the expected 2015 revenue of about $445 million. This expectation could prove conservative, given that Instagram recently announced that it intends to use Facebook's ad infrastructure to manage its own ads, which the analyst believes would improve targeting and give Instagram access to Facebook's over 2 million advertisers. "While we expect this ramp to be measured so as to not disrupt engagement and user growth, we believe we could begin seeing the benefits of the integration as early as 4Q15. Overall, we view Instagram as one of multiple catalysts across Facebook, with Video, Messenger, WhatsApp, and Oculus among the others, while Facebook's core continues to deliver strong engagement and we believe advertisers will continue to ramp ad spend across the platform," the JMP report said. Due to these potential catalysts, the analyst believes that Facebook is the best positioned among JMP's coverage universe over the next several years and that video would prove to be a key driver of growth.