Facebook Inc (NASDAQ:FB) is worth $101 per share according to a new report on the firm from JPMorgan. Analyst Ronald V. Josey said that he expects Mark Zuckerberg’s firm to Outperform the market in the next twelve months. He put a $101 price target on the firm’s stock up from $98 in his last report.
Shares in Facebook were trading strongly upward on Thursday after a reprieve from the Fed sent stocks higher across the board. At time of writing shares in the Menlo Park firm were selling for $83, up 1.43 percent for the morning’s trading so far. At time of writing the S&P 500 (INDEXSP:.INX) was up 0.89%.
Facebook gains ad dollar share
Mr. Josey said that his research showed that Facebook was getting a greater total share of ad dollars, and that Instagram “engagement and MAUs continue to ramp.” A good part of the reason for his price target increase came from the photo-sharing part of Facebook’s empire.
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He noted that “brands are increasingly adopting the platform, and that the evolution of Instagram’s ad products and integration with Facebook’s ad technology could lead to material revenue growth going forward.” He’s looking for the site, which is just one part of Facebook’s overall ad business, to bring in $1.6bn in revenue in 2016. He sees sales on the platform hitting $445m in 2015.
Instagram said recently that it would begin to use Facebook’s ad tech and user data to build its own ads. Mr. Josey thinks that the firm will use those assets to improve ad targeting and give it access to the advertisers that already work through Facebook.
The JPMorgan analyst says that he expected the photo-sharing network to be careful with the way it brings in ads. “While we expect this ramp to be measured so as to not disrupt engagement and user growth, we believe we could begin seeing the benefits of the integration as early as 4Q15,” he stated.
Josey noted that Facebook was one of the best positioned stocks across all of the firm’s that JPMorgan covers. He said that “Facebook’s core continues to deliver strong engagement and we believe advertisers will continue to ramp ad spend across the platform”
Instagram is for the rich
Instagram is likely a breeding ground for ads as the firm’s platform attracts more affluent young people than other social networks. A report from Pew Research Center published on April 9 of this year showed that the site is the top pick for teens with extra cash to spend.
In households with income of more than $100,000 it was found that 25% of teens held Instagram as their favorite social network, or the one that they spent the most time on. In poorer households, those with earnings of more than $30,000 per year but less than $50,000, just 15% of kids spent the most time on the site.
Facebook is the poorer side of that coin. The site is used more by teens in poor households, while just 31% of teens in the top tier said that it was the network they spent most time on.
Facebook has found a divided social network market, and it’s bought into all sides of it. The company owns four key pieces of the social web that is driving ad growth right now. Instagram, Facebook, Messenger and WhatsApp take up 35% of all time spent on mobile according to a May report from JPMorgan’s Doug Anmuth.
Instagram, with its affluent users, is a very important leg of Facebook’s growth and its newfound focus on ads should be a big story in growth going forward, if JPMorgan is to be believed.