Putting a $37 price target on Facebook Inc (NASDAQ:FB) is a bit risky right now. On today’s market shares have fallen a fraction, and in the last five day’s trading, the firm’s stock has fallen by close to 5 percent. Deutsche Bank analysts are willing to take that risk, however, and they lay out their argument in a new report.
The gist of the report is that though it’s still too early to tell a lot about Facebook Inc (NASDAQ:FB), the trends are good and the company should see significant growth in the next year. The three major factors in favor of the company’s growth are its ad technology, its payments revenue and its margins.
On ad revenue, the Deutsche Bank analysts are pleased with the Facebook Inc (NASDAQ:FB) acquisition of the Atlas ad service from Microsoft Corporation (NASDAQ:MSFT). The analysts are confident that the company’s efforts to improve its technology in the area will be a strong driver of growth in the months to come.
The most important aspect of ad technology for Facebook Inc (NASDAQ:FB) is its ability to improve analysis of upper funnel attribution. This means that the company is working on a way to show how ads affect customers before they buy. Right now, the metrics only cover the last time a user clicked an ad before purchase.
Facebook Inc (FB) is improving its ad service:
Facebook Inc (NASDAQ:FB) is improving its ad service all the time, and increased quality usually means increased cost per click, which is what will drive Facebook Inc (NASDAQ:FB) value. There are other revenue streams that help the company pad its bottom line, however.
Payments from applications not run by Zynga Inc (NASDAQ:ZNGA) are up at Menlo Park. The base of those payments is small, according to the Deutsche Bank analysts, but the size continues to rise rapidly, and the area could become lucrative and meaningful for Facebook Inc (NASDAQ:FB).
The other factor deals with investments Facebook Inc (NASDAQ:FB) is making, and how that will affect the firm’s cost base and its margins. Facebook Inc (NASDAQ:FB) is set to prioritize research and investment, rather than trying to keep at a specific margin level. That means that investors shouldn’t get tied up in margin problems, as long as the firm continues to develop its technology.
The problem for Facebook Inc (NASDAQ:FB), according to this report, is that it’s too early to tell how the firm will perform just yet, especially on mobile revenue.