Facebook Inc (NASDAQ:FB) stock has been on a steady uptrend since the beginning of the year, touching its record highs going into the company’s fourth quarter earnings report next week. All the signs point to another strong set of results, and analysts are virtually chopping at the bit to see those numbers. At least two firms have boosted their price targets for Facebook Inc (NASDAQ:FB) stock this month.
In addition to rising engagement, advertisers are watching the return on their investments rise higher and higher, which bodes well for Facebook Inc (NASDAQ:FB) in the long term.
Facebook stock a Buy on multiple factors
In a note dated Jan. 24 Needham analyst Laura Martin reiterated her Buy rating and $150 target price on Facebook Inc (NASDAQ:FB) stock. She defines the social networking firm as “the economic winner in mobile markets,” which she says is important because she believes that “digital markets are ‘winner take most.'”
She said the social network is the mobile winner as approximately 95% of time spent on its platforms is mobile and about 85% of total revenues come from mobile device. Further, she said Facebook captures one-fifth of all the mobile ad dollars spent, and it has been capturing a larger and larger share.
Martin also noted that Facebook Inc (NASDAQ:FB) rivals Google parent Alphabet with its 1.8 billion unique visitors and 1.18 billion unique daily users. Users spend about 50 minutes per day on the social network, although Google doesn’t measure the length of typical engagements.
Volatility could return to FB stock
She feels that investors have begun to move past the ad load fears following Facebook’s warnings about decelerating growth in ad load. However, she warns that if the company mentions this again on next week’s earnings call, volatility will likely return to Facebook Inc (NASDAQ:FB) stock. However, she feels, as many other analysts do, that video ads’ higher average selling prices, combined with a mix shift toward the more expensive video ads can offset the decelerating growth in ad load.
Nanigans, which offers advertising automation software, reports in its fourth quarter “Global Advertising Benchmark Report” that spending on mobile video ads hit an all-time high. The firm said North and South American advertisers that were targeting mobile Facebook Inc (NASDAQ:FB) users allocated 18.9% of their mobile ad spend to video formats. This marked a 20% sequential increase for video ads, which underlines Martin’s view of increasing video ad spend.
Susquehanna analyst Shyam Patil doesn’t expect ad load growth to slow until the middle of this year, although his social ad checks did suggest “some level of deceleration” in core Facebook Inc (NASDAQ:FB) spend in the fourth quarter. His checks also pointed to a strong fourth quarter for Instagram and offered signs that the photo-sharing network is starting to increase as a percentage of ad spend at Facebook Inc (NASDAQ:FB). He adds that Instagram’s growth should remain solid this year, with 2017 marking the first year it has become part of marketers’ annual planning cycle.
Shares of Facebook Inc (NASDAQ:FB) stock rose by as much as 1.41% to $131.21 during regular trading hours on Wednesday.