Facebook Inc (NASDAQ:FB) investors are getting cautious. The stock’s near doubling in value through 2013 so far has spooked investors. The company’s decision to keep news feed ad load stable through the end of the year is also a cause for concern. A report from Citigroup Inc. (NYSE:C), authored by Mark May and Kevin Allen, seeks to dispel that caution.

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According to the analysts, nvestors should be concentrating on the long term. They build a model for how Facebook Inc (NASDAQ:FB) is going to reach build its business into a thriving ad company through the report. The analysts are confident about Facebook’s potential. They put a price target of $70 on the company’s shares, boosting it from a previous target of $57.

Facebook on the road toward $70

The report lists the key revenue earners for Facebook Inc (NASDAQ:FB) in the long term. They are an increase in the cost per ad, or eCPM; Instagram ads; video ads; fill rate and the company’s third party ad network. Facebook Inc (NASDAQ:FB) is, according to the analysts, primed for growth and could replicate Google’s growth when it went public.

A closer look at each of these businesses leads the analysts to believe that Facebook Inc (NASDAQ:FB) could add $3 billion in revenue and $1.8 billion adjusted EBITDA in two years. That’s how they build the bridge required to value the company at $70 per share, or a market cap of around $170 billion dollars.

Increasing core eCPMs is projected to add $5 per share; Instagram ads add $3 per share; video advertisement adds $2 per share; fill rate adds $2 per share; and the third party network adds $1 per share according to the model in this report. That totals $13, which the analysts add to their previous $57 price target to project Facebook Inc (NASDAQ:FB) shares at $70.

Facebook growth

When Google Inc (NASDAQ:GOOG) was building its business it did not have to deal with an entrenched competitor ahead in technology, finances and human capital. Facebook Inc (NASDAQ:FB) does have to deal with these problems either. It’s not absurd to suggest that the firm’s earnings will grow massively, but there are still grave risks.

Facebook Inc (NASDAQ:FB) shareholders will be happy with the Citigroup Inc (NYSE:C) report. It offers a reasonable path to value for the company. Shares are climbing on this morning’s market, but if investors were cautious after the earnings report, it may take some time for them to respond to growth predictions.

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