Facebook (FB)’s Gifts service and its monetization of Instagram have made one research firm bullish on the stock. Sterne Agee analysts believe both services could produce millions of dollars in revenue for the social media giant in coming years.
Facebook Inc (NASDAQ:FB) Gifts and Instagram are providing buoyancy for the company’s stock according to a recent report from analysts at Sterne Agee. They see both new services as having excellent revenue potential for the social media giant, potentially generating several hundred million in earnings before taxes, depreciation and amortization.
Sterne Agee is bullish on shares of Facebook Inc (NASDAQ:FB) because of the opportunities for revenue growth through these two new services. Facebook Inc (NASDAQ:FB) Gifts was rolled out earlier this week in the U.S., and the monetization of Instagram is expected to start soon. Also both of these two revenue streams are perfect for mobile platforms, which recent indications have shown is essential for the growth of Facebook.
Facebook tested its Gifts offering for two months, and a survey conducted in October indicated that almost half of those surveyed were interested in trying it. Sterne Agee believes that more consumers could be interested after they see how it works. They see it as “a very natural, unobtrusive and sensible way” for Facebook to get in on e-commerce. However they also warn investors that Facebook Gifts is still in its early days. They expect the product to be one of the main talking points when Facebook does its fourth quarter call.
Sterne Agee analysts say they also believe Instagram could generate between $500 and $700 million in ad revenue over the next three years with high profit margins. Also there could be additional ways to monetize this service, like developing something similar to Shutterfly and other websites that offer digital photo products and services.
Sterne Agee gives Facebook shares a Buy rating and has set its price target at $32 per share. Shares of Facebook Inc (NASDAQ:FB) rose 2 percent in afternoon trading after a sharp drop-off earlier in the afternoon.