Credit: Shutterstock photoSince becoming a mobile company in 2012, Facebook (FB) has become an advertising behemoth, the likes of which the technology world has rarely seen. But the company's future is likely to lie outside its app, with investors salivating over the possibilities of as-yet untapped revenue potential from some of its recent purchases.
Facebook has become much more than a social network. By acquiring WhatsApp, Instagram, Oculus Rift, and breaking out Facebook Messenger into a standalone product, it seeks to become the way people communicate with each other.
The growth at the Facebook-owned properties is impressive and is only likely to get better, JMP Securities analyst Ronald Josey wrote in a note. "Instagram monetization, and the Facebook Audience Network, longer-term catalysts with WhatsApp and Oculus, and its success in building audiences across multiple apps given WhatsApp’s 800 million MAUs [Monthly Active Users], Messenger’s 600 million MAUs, and Instagram’s 300 million MAUs, we believe Facebook is well positioned to continue to take share of the overall advertising environment, globally," Josey wrote in a note.
Shutterstock PhotoCanaccord Genuity, in another note, said: "Management made focused comments regarding how Facebook's suite of services continues to progress, with WhatsApp growing to 800M MAUs, Messenger accounting for 10% of all VoIP calls, and Instagram reaching 200M DAUs [Daily Active Users] spending 21 minutes per day."
This is especially important as the majority of Facebook's revenue comes from mobile. Mobile ads were 73% of advertising revenue ($3.32 billion) in the first quarter, up from 59% year over year. For the first quarter in total, Facebook earned 42 cents a share on $3.54 billion in revenue. Analysts were expecting 40 cents share on $3.56 billion in revenue.
Even though Facebook CEO Mark Zuckerberg and team gave no updates on when these properties will start to make money for the company, he said spending $19 billion leads to having "pretty high expectations for how it's going to do."
Cantor Fitzgerald analyst Youssef Squali, who rates shares buy with a $92 price target, has the buy rating for four reasons: being the largest and most engaging Internet platform, the shift of ad dollars to mobile and social, a massive video opportunity ahead and "untapped monetization potential for Instagram, Messenger, and WhatsApp, all at a compelling valuation, in our view."
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
