Facebook Inc (NASDAQ:FB) is still the leader in the “social internet.” That is the dramatic, though possibly meaningless statement, that opens a recent Morgan Stanley report on the Menlo Park company. Mark Zuckerberg’s firm has grown significantly since going public, but it is still resting on high expectations, and its opportunities are not all that clear cut.
According to the report Facebook’s next big opportunity is in video advertising. The market, which is now dominated by Google Inc (NASDAQ:GOOG) in competition with traditional television, could be worth a huge amount of money in the medium term and, according to the analysts who authored the report, it could be a boon to Facebook Inc (NASDAQ:FB) earnings in 2014.
Facebook heads to video for revenue
Facebook Inc (NASDAQ:FB) has to discover a path to substantial profit if it wants to avoid a slump in its stock. The company has made strides in monetizing its platform in recent years, but it is still a distance from providing the kind of consistent returns that rival Google Inc (NASDAQ:GOOG) manages on a quarterly basis.
According to the Morgan Stanley report video advertising is the next multi-billion opportunity for Facebook Inc (NASDAQ:FB). The medium could contribute $900 million to the company’s revenue for the full year 2014 according to the report. Total revenue and earnings are likely to be boosted by 10-15% in the next year or two on the back of that revenue according to the report.
Rich media is undoubtedly the hot topic for web investments right now with companies in the arena, including Google Inc (NASDAQ:GOOG) and Netflix Inc. (NASDAQ:NFLX) revealing out-sized revenue per user. Consumers are willing to pay more for video than they are for text, and video ads appear to be more valuable than banner messages.
The market has already been developed by Google, Facebook Inc (NASDAQ:FB) simply needs to demonstrate its ability to monetize video in order to get market support for the endeavour.
Facebook to beat earnings estimates
The analysts appear to be bullish on Facebook across the board. According to their estimates the company is likely to beat average analysts expectations in its next earnings report. Facebook Inc (NASDAQ:FB) is expected to reveal its earnings numbers for the three months through March on April 23 after the market closes.
Morgan Stanley believes that Facebook Inc (NASDAQ:FB) will show earnings 8% above the estimates of analysts, while revenue is expected to come in at 3% above consensus. The bullish view on the company stems from good returns from mobile alongside better payments revenue.
The report put a price target of $72 per share and rated the company at Outperform. Shares in Facebook Inc (NASDAQ:FB) closed at $58.94 on Thursday afternoon after losing more than 1% of their value.