Analysis: Facebook Gaining Video Traction

Facebook Inc (NASDAQ: FB) introduced the Watch feature last year to showcase original video content. It's seeing "encouraging" results, according to Morgan Stanley. 

The Analyst

Morgan Stanley's Brian Nowak maintains an Overweight rating on Facebook's stock with an unchanged $215 price target.

The Thesis

Surprisingly, Facebook is seeing "encouraging" results from its relatively new video streaming offering, according to a proprietary survey conducted by Nowak. (See the analyst's track record here.) 

Morgan Stanley's "AlphaWise" survey found that 40 percent of respondents who use Facebook are using Watch on a weekly basis and 24 percent on a daily basis. And 60 percent of respondents who spend at least three hours a day on Facebook's platform use Watch on a weekly basis, the analyst said. 

Among those who use Watch, 75 percent of users tune in to short-format videos that are less than 20 minutes long on a weekly basis, and almost 50 percent view long-format content that is more than 20 minutes. This data is similar to YouTube, where 80 percent of users watch short-form content and 50 percent watch long-form content.

While Facebook Watch may be gaining early traction, YouTube remains the clear online leader, as the survey revealed that 78 percent of respondents have used YouTube in the past year. 

"We are encouraged (and admittedly surprised) by this early Watch traction as it speaks to FB's ability to drive adoption of new products." 

Price Action

Shares of Facebook were trading higher by around 0.7 percent at the time of publication Friday.

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