Facebook Inc (NASDAQ:FB)’s price target has been raised by Wedbush, citing improving market conditions, surges in mobile monetization and potential opportunities in video advertising. Wedbush analysts Michael Pachter, Nick McKay and Nick Citrin note that share prices of companies in Facebook’s Internet peer group have also risen in the recent months.
Wedbush analysts have raised their price target on Facebook from $39 to $49 and have maintained an Outperform rating.
Facebook testing auto-play videos on mobile
Facebook Inc (NASDAQ:FB) stated on September 12th that it is in the process of testing auto-play videos on mobile devices, which will display content from personal Facebook accounts, verified pages, musician pages, and band pages. Though the feature will not be immediately available to marketers, according to Advertising Age, Facebook has been in talks with various brands and agencies for over a year. Further, Advertising Age expects Facebook to charge $1.0-$2.4 million for a day’s distribution of a 15 second spot.
According to eMarketer, advertisers will spend $5.7 billion on video ads in 2014, which is a surge from $4.1 billion in 2013. Generally, an auto play option allows the video on the user’s mobile to play when the user does not scroll and leaves the post on his screen for few minutes. In Instagram or Facebook, video runs automatically when users stop to look at the post.
Mobile growth backed by Instagram, a good combination
Analysts expect Facebook Inc (NASDAQ:FB) to be strong in mobile growth in the future, backed by the monetization of Instagram. Active user bases on mobile have expanded on Facebook, compared to desktop, and it is looking forward to generating more revenue on mobile than desktop, in the coming years.
Analysts are expecting mobile revenue to grow next year, getting support from Instagram’s platform with video ads shown to over 130 million monthly users. Analysts feel that higher ad rates will be a major contributor to the revenues, primarily with the expansion of local ads. Facebook Inc (NASDAQ:FB) is looking forward to increase the local advertising, which is pushing the ad rates significantly up. Further, the company is expanding its average revenue per user (ARPU) globally.
Investors looked closely into monetization as Facebook Inc (NASDAQ:FB) started mobile monetization a year ago, and has generated $600 million in mobile advertising revenue in the latest quarter.
Facebook has started to realize the massive monetization capacity, and analysts are expecting the social network to display the operating leverage, which is intrinsic to its business model, after it exits the high growth stage.