Skip to main content

Market Overview

'Watch' Could Add $500 Million To Facebook Sales

'Watch' Could Add $500 Million To Facebook Sales

Facebook Inc (NASDAQ: FB) has made no secret of the fact that it's making a big bet on video. According to one Wall Street analyst, Facebook Watch could generate more than half a billion dollars of revenue in 2018.

The Analyst

Morgan Stanley analyst Brian Nowak has an Overweight rating and $200 price target for Facebook.

The Thesis

Nowak is projecting Facebook will spend roughly $200 million producing original video content in 2018. He expects that aggressive budget will result in an estimated 15 longer-form and 100 shorter-form series.

Morgan Stanley is anticipating mid-roll ads on these videos, with partners getting 55 percent of the split, in-line with Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)’s YouTube split. However, Nowak expects ad revenue sharing will only begin once Facebook has recovered its initial $200 billion content costs.

“Monitoring Watch engagement trends will be critical to gauging FB's video success, and by our math FB needs to drive Watch engagement to ~2% of total core FB minutes to break-even on our base case ~$200mn content investment,” Nowak said in a note.

Broken down by user, Morgan Stanley estimates the break-even point for video represents about 7 minutes of watch time per day for each North American daily active user, or about 3 minutes per day if Facebook expands Watch outside North America to the rest of its international users.

Morgan Stanley estimates total Watch cost for Facebook in 2018 will be about $400 million once content costs and ad revenue sharing costs are factored in. However, Nowak estimates the feature could brng in $565 million in total revenue by year’s end.

Price Action

Facebook stock has continued its positive momentum in 2017. The stock has gained 51.8 percent year-to-date, roughly triple the return of the S&P 500.

Related Links:

Traders See Signs Of Rotation Into Financials Amid Nasdaq's Worst Day In Months

Snapchat's Evan Spiegel: Newsfeeds Came At Huge Cost 'To Facts, Our Minds And The Media Industry'

Latest Ratings for FB

Feb 2021Loop CapitalMaintainsBuy
Jan 2021BMO CapitalMaintainsOutperform
Jan 2021MKM PartnersMaintainsBuy

View More Analyst Ratings for FB
View the Latest Analyst Ratings


Related Articles (FB)

View Comments and Join the Discussion!

Posted-In: Brian Nowak Facebook Watch Morgan StanleyAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

Latest Ratings

FSRMorgan StanleyMaintains40.0
MEDDA DavidsonMaintains302.0
VICRBWS FinancialMaintains120.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at