Facebook Actually Has 2 More Facebook's To Unlock: Here's What It Means

Credit Suisse’s Stephen Ju believes that investors in Facebook Inc (NASDAQ: FB) would benefit in the long term, not only from the monetization of Messenger, but also from WhatsApp.

The analyst maintained an Outperform rating on Facebook, while raising the price target from $140 to $142.

Near-Term Positivity

For the near term, Ju mentioned that checks were positive, indicating the allocation of incremental budgets for Instagram and visor ads, along with continuing pricing strength across the company’s desktop and mobile newsfeed ad inventory.

Ju mentioned that the pricing strength has persisted “despite typical seasonality and modest sequential declines of mid- to high-single digits from a seasonally strong 4Q.”

Related Link: CLSA Defends Poor Facebook AdParlor Metrics, Says This Isn't The End Of The Story

Two Facebooks In The Long Term

“Looking longer term, we submit that there are two more Facebooks lurking inside Facebook as the "chat feed" in Messenger will evolve to a news feed over time, which will lead the way to native advertising,” Ju stated.

Therefore, the stock is expected to benefit from additional optionality that investors would be willing to extent for the monetization of Messenger, which is expected in the near to medium term.

The analyst also expressed optimism regarding WhatsApp over the longer term, stating that Facebook was expected to be able to drive long term revenue growth without having to significantly increase ad loads.

Near-term drivers, according to the Credit Suisse report include Instagram, DPA and Premium Video.

The report also pointed out that “Street models continue to underestimate the long-term monetization potential of upcoming new products.”