Facebook Inc (NASDAQ:FB) stock declined on Tuesday after one of the few firms still lacking a Buy rating on it decided to join the crowd. BTIG analysts said they were wrong about the social network when they downgraded it to Neutral in July 2016. They seem especially fond of Instagram Stories, one of a growing number Snapchat-like offerings.

Facebook Slideshow FB
Image Credit: Geralt / Pixabay

Facebook Inc (FB) stock moved to Buy

Facebook Inc (NASDAQ:FB) stock is up by about 20% year to date, and BTIG analyst Rich Greenfield said in his research note on Tuesday that not having a Buy rating on it this year has been a mistake. He slapped a $175 price target on Facebook Inc (NASDAQ:FB) stock as he said the shift toward mobile has become too strong to ignore.

He praised Instagram Stories, which he had initially written off as nothing but a Snapchat clone. He says that Instagram Stories now has about 150 million daily active users, and it has helped push Instagram past the 400 million user mark. He added that Stories has also provided Instagram a way for brands to monetize using video ads.

Greenfield sees Instagram Stories as a great addition because the feature as “removed the pressure from having to post great pictures to Instagram that generate significant likes.” Just like on Snapchat Stories, the content posted on Instagram Stories disappears in 24 hours, no one will ever know how many likes a particular piece of content received, he said. In his view, this encourages greater frequency in posting because users aren’t worried so much about creating posts that are popular.

Facebook Inc (FB) shifts toward higher-quality videos

The analyst also praised the social network’s shift away from live video and toward an emphasis on higher-quality video content. He noted that he had initially said that the pivot toward live video was not wise because he was concerned that user engagement would take a hit due to poor quality content.

He explained that professional content producers such as CNN, Comedy Central and HBO offer better engagement and bring in more ad dollars for Facebook Inc (NASDAQ:FB) and added that he would like to see the company move toward “higher-quality, longer-form content.” He feels that stage is now set for this type of content with the deemphasis on live video, the beginning of monetization and the addition of the picture-in-picture feature.

Greenfield said Facebook Inc (NASDAQ:FB) stock paused in late 2016 as investors became concerned that this year would bring a “meaningful deceleration in growth.” However, he added that the trend reversed on the back of the social network’s strong fourth quarter earnings report and a string of other positive changes.

UBS boosts price target for Facebook Inc (FB) stock

BTIG isn’t the only firm getting more constructive on Facebook Inc (NASDAQ:FB) stock at this time. UBS analyst Eric Sheridan boosted his price target for Facebook Inc (NASDAQ:FB) stock late last week, but even his revised target isn’t as high as BTIG’s new price target. Sheridan increased his price target from $155 to $165 per share and, like Greenfield, spoke to the concerns many investors had about the company late last year.

One of the biggest issues was the sustainability of the social networking giant’s ad revenue, and Sheridan does believe that it can continue to grow its ad business at a compound annual growth rate of 25% between 2016 and 2019. Sheridan believes that the sustainability concerns place “an undue emphasis on the role of advertising impression growth” for the core Facebook Inc (NASDAQ:FB) platform. He also feels that those concerns ignore the main drivers of growth, including new ad products, improved measurement tools and sustained engagement levels across all of the company’s social networking properties.

Also last year, investors were concerned about Facebook Inc (NASDAQ:FB)’s expense growth, but Sheridan said the company will probably “sustain high levels of investment against its 3-10 year ambitious agenda.” However, he doesn’t see a “material re-rating” in the company’s operating margins. In fact, he sees forward multiples for Facebook Inc (NASDAQ:FB) stock as being “attractive relative to its growth/ return profile.”

Facebook Inc (NASDAQ:FB) stock opened at yet another new high of $141.15 on Tuesday and surged early to hit a new intraday high of $142.31 before reversing course. The stock closed down 1.02% to $138.51 on Tuesday.