Facebook Inc (NASDAQ:FB)’s got plenty of drivers for growth, according to analysts at UBS. They note that investors remain concerned about revenue growth and capital allocation, specifically in the area of mergers and acquisitions. However, they have actually increased their long-term estimates for Facebook, saying they see plenty of opportunities for growth in the social network’s future.

facebook

In a report dated July 7, 2014, analysts Eric Sheridan, Vishal Patel and Timothy Chiodo reiterated their Buy rating and $90 per share price target for Facebook. They note that Facebook stock has followed the same trajectories as most Internet stocks this year. First it underperformed the SPX by 19.7% between Feb. 19 and Apr. 28. Then it began to outperform the index by 10.5% between Apr. 28 and now.

Facebook’s big drivers

They highlight four main incremental drivers of growth at Facebook. They are premium video ads, Instagram, WhatsApp and Oculus. The UBS team says that these emerging businesses offer leverage to all of the brand advertising dollars that are moving online, as well as the widening of mobile messaging and also next-gen hardware platforms.

Under brand advertising, they project that Facebook will see $1 billion in revenue from its premium video ads. They expect $1 billion in revenue from Instagram by the following year, saying that both of these two drivers will “allow brand advertisers to deploy additional dollars in the Facebook ecosystem.”

They think WhatsApp’s large scale as well as its cross-platform and global availability and easy-to-use interface are important strengths for the messaging app. They estimate that Facebook will also see $1 billion in revenue from it by 2018, assuming that the current monetization model remains in place. They project $500 million in revenue from Oculus Rift by 2018 as it establishes itself as not only a gaming device but also a device for education, communications, and other uses.

Raising Facebook estimates

The UBS team introduced their revenue and EBITDA estimates for these four emerging businesses, thus raising their overall estimates a bit. They also raised their long-term compound annual growth rate estimates upward, bringing them from 17% to 23% for 2015 through 2018 revenue. Their growth rate for EBITDA moves from 19% to 24% for the same years.

Facebook revenue summary