Facebook Inc. FB shares hit a new 52-week high of $87.97 in yesterday’s trading session, closing at $87.88. This rise in share price marked a decent year-to-date return of about 12.6% compared with Nasdaq’s return of 3.2% in the same period. Average volume of shares traded over the last three months was around 23.4 million.
This Zacks Rank #3 (Hold) company has a market cap of $246.3 billion and a long-term expected earnings growth rate of 25%.
Recently, the company declared that its ad targeting tools will soon be made available for Instagram advertisers as well. Advertisers will be able to deliver much more targeted ads based on the user’s Facebook profile data. The company also updated the ‘Explore’ feature in Instagram that allows users to search for news and events in real time.
Earlier this month, Facebook announced its plans to broaden its ad offerings on the platform in a bid to monetize Instagram later. The company is taking a three-pronged approach to develop ads. This includes the expansion of ad offerings (with action-oriented formats), enhancing of marketers’ targeting capabilities and streamlining and simplifying the ad-purchasing process.
Instagram was acquired by Facebook in 2012 for $1 billion and since then has gained immense popularity. Advertising was introduced on Instagram in late 2013 and has been consistently gaining traction with increasing engagement levels. The company had stated in an earlier report that on an average, users in the U.S. spend as much as 20% of their mobile time on Facebook and Instagram. In fact, in Dec 2014, Instagram surpassed Twitter’s TWTR user base with more than 300 million active users. According to the Nielsen Brand Effect survey, Instagram is well-positioned in the online advertising market with ad recall from sponsored posts 2.9 times greater than the standard.
We believe that the immense scope for monetization of Instagram and other Facebook platforms like WhatsApp and especially Oculus can be significant growth drivers in the long run, given their escalating user bases.
Apart from this, a report from London-based research firm, Ampere Analysis states that Facebook has been consistently gaining traction over Google's GOOGL YouTube as a platform for online marketing and might as well surpass the latter. This bodes well for the company.
Meanwhile, Facebook continues to benefit from its massive user base, increasing engagement levels, frequently updated mobile products and strategic acquisitions.
A better-ranked stock in the technology space is LendingClub Corporation LC, having a Zacks Rank 2 (Buy).
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