Facebook Inc (NASDAQ:FB) shares hit new highs on Wednesday after the firm revealed a deal with HBO to add limited TV streaming to its core platform. Facebook is going to partner with the premium cable content house in order to show the pilots of two new shows. The deal comes just a week after Amazon.com Inc. (NASDAQ:AMZN) said it would partner with Facebook in a similar way.
The HBO deal is small to start with and Brean Capital’s Sarah Hindlian isn’t sure that traders should make a move based on the info out there right now. In a report published on Wednesday June 24, she said that “It is too early to suggest that investors do anything incremental with the news.” She did say that it was a trend to watch going forward, however.
Wall Street bets on Facebook
Wall Street as a whole thinks that shares in Facebook are worth $96, a level they’re quickly approaching. The majority of analysts following the firm rate it at Buy or Overweight, while just one analyst thinks that Mark Zuckerberg’s firm will Underperform in the months ahead.
Hindilian is one of 20 Wall Street analysts that has a Buy rating on Facebook shares. She thinks that stock in the social network will be worth $108 in twelve months time, and is one of many analysts that can see Facebook crossing that boundary in the next year. A $100 share price would value Facebook at close to $300 billion.
The firm has lots of Wall Street support to meet that goal, but it’s not clear if the market will continue to support the firm’s huge rise in value. Shares in the firm have gained more than 13% since the start of 2015, and they’ve grown by more than 37% in the last twelve months.
Citigroup Inc (NYSE:C), which has a $97 price target on Facebook, says that the firm is under-owned by institutions and expects demand from them to pick up and support the price.
Their most recent report on Facebook concluded that the firm, along with Google, has the “greatest near-term opportunity among large-cap internet to benefit from portfolio re-weighting if they execute consistent with current investor expectations.”
Facebook grows into video
As Hindilian said, there’s no reason for traders to buy into Facebook based on a small deal with HBO to show off two new shows, but there may be reason to invest in the firm based on its wider growth trend. Video is just one area in which Facebook is excelling.
She is looking for Facebook to work less like Netflix and more like a secular platform for content. “Facebook will be less the enemy of network TV, and more likely a potential partner in a blended advertising share model.”
There’s a big opportunity for Facebook to help promote content from premium services, like HBO and Amazon Prime, and monetize them on its social network in exchange for free promotion. Video content is going to offer Facebook big ad money, and it’s one of the directions that Wall Street hopes the firm can grow in.
Mark Mahaney of RBC Capital reckons that Facebook will be the biggest beneficiary of video and mobile ads going ahead.
On CNBC on Wednesday, June 24, he said that “They are worth $105, that’s our price target. At one point, Facebook probably was worth $15 because they couldn’t figure out mobile. Once they figured out mobile, which is where all their dramatic growth has been over the last three years, then the stock deserved to appreciate to go higher.”
Wall Street is looking for Facebook to hit over $100 in the next few months, and traders are going to be fighting to get into the stock at the right level. In this morning’s pre-market shares were up a fraction on positive analyst news, but this week’s highs could be met with reactive selling if bad news pops up before Friday afternoon.