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Why One Analyst Says Facebook Stock Is Hot Despite Site's Dwindling Cool Factor
Photo Credit: Forbes Business

Why One Analyst Says Facebook Stock Is Hot Despite Site's Dwindling Cool Factor

Jan 6 2014, 12:07pm CST | by

As parents and grandparents have joined the ranks of Facebook’s most active users, the site’s bread and butter — the teenage and Millennial sets — have increasingly turned their attention to...

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29 weeks ago

Why One Analyst Says Facebook Stock Is Hot Despite Site's Dwindling Cool Factor

Jan 6 2014, 12:07pm CST | by

As parents and grandparents have joined the ranks of Facebook’s most active users, the site’s bread and butter — the teenage and Millennial sets — have increasingly turned their attention to sites like Snapchat, Vine and Twitter. After all, when dorky Uncle Larry starts “liking” all your pictures, what used to feel cool can suddenly feel passe. But according to one analyst from SunTrust, Facebook’s dwindling cool factor is hardly anything for investors to worry about.

In a research note released Monday morning, SunTrust analyst Robert Peck took a bullish stance on the company, reiterating Facebook’s “buy” rating and raising its 2014 price target from $55 per share to $65 per share. Peck also revised Facebook’s fourth quarter earnings estimate, adjusting its expected revenue to $2.37 billion, up from $2.29 billion. Facebook said Monday that it will release its fourth quarter earnings after the market closes on January 29.

Peck said his bullish outlook is driven by five factors, including the monetization of Instagram, a better ad quality and the integration of mobile ads. As for claims that teens aren’t using the site ? Peck sees less of a Myspace comparison than Google and Amazon analogies.

“[M]uch like how Google and Amazon aren’t necessarily considered “cool” anymore, teens and older people still use those platforms due to their utility,” he said, noting that because users share “life events” on Facebook there is an air of permanence and a true community platform. “Will teens begin to use it more as community matters more once they separate from friends physically? As long as Facebook continues to innovate and invest in new functionality, we see no reason why they wouldn’t.”

A recent Pew study found that 63% of adults visit Facebook on a daily basis, and 40% of that group visits the site multiple times a day. Peck said that this type of activity level lends further credence to the idea that Facebook is a utility and not just a hot trend. Furthermore, he said, the number of users visiting Instagram on a monthly basis (150 million as of Facebook’s third quarter earnings report) could translate into significant amounts of money.

“Assuming Facebook shows 2 ads per visit, we calculated ~63 billion total impressions the company could sell in 2014. At an effective [cost per impression] of $2.50, we calculate over $150 million of incremental revenue in 2014, growing to almost $700 million in 2017,” Peck wrote.

Indeed, results from an early trial of Instagram ads were positive: Ben & Jerry’s reached 9.8 million 18 to 34 year-olds in 8 days, while an Instagram Levi’s ad reached 7.4 million 18 to 34 year-olds over the course of 9 days. Control groups for both ads revealed double-digit increases in brand recall.

For its near-term, fourth-quarter revenue prediction, Peck said that the $2.4 billion revenue estimate is split between payment revenues of $242 million (which would mark a 5% year-over-year decline) and ad revenues of $2.13 billion, a 60% year-over-year increase. While the accuracy of Peck’s prediction will come to light when Facebook reports its fourth quarter results on the 29th, Peck’s recent track record is pretty good: he was the first to set a public price target for Twitter, setting a bullish $50 per share target when the company itself said shares were worth a little over $20 a pop. Today, Twitter is trading for $64.72 per share, a 53.7% gain since its November 7, 2013 stock market debut.

Following the release of Peck’s report, shares of Facebook were up 2.3% in Monday morning trading. The stock finished 2013 with 95.2% growth.

Source: Forbes Business

 
Update
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7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by robber ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat tod ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin Hussein. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selata ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister D ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year invol ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kide ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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