This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
A strong performer on the stock exchange since its 2012 initial public offering (IPO), Facebook, Inc (NASDAQ: FB) is well positioned to do even better. That's according to a new analysis of the stock from analyst Lloyd Walmsley at Deutsche Bank, who has raised the target price of the shares to a new "street high."
Walmsley's new level is $385, from the previous $355. The former is more than 32% above Facebook's most recent closing price. He's maintaining his buy recommendation on the stock.
The prognosticator believes that ad spending, a crucial source of revenue for the company, will see a rise. He also feels that worries about upcoming changes Apple Inc (NASDAQ: AAPL) is making to its user privacy settings will become less of a factor in market sentiment.
"We think investor focus is starting to shift away from fears around iOS changes toward a continued ad recovery and benefits from more eCommerce activity shifting into Facebook's platform," Walmsley wrote in his research note explaining the price target hike.
Facebook already has a massive user base, so it can't rely on significant improvement in those numbers to drive its business forward. Rather, it will be reliant on expanding advertising take and other revenue sources for meaningful growth.
Walmsley thinks that it has several levers it can pull for this, including the Tik Tok-like Reels video feature on Instagram. He's estimating that Reels can potentially pull in $21 billion in revenue.
Investors seem to be buying this argument. On Monday, Facebook shares trounced the S&P 500 Index (INDEXSP: .INX) by rising to close 2.8% higher on the day.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool recommends the following options: long March 2023 $120.0 calls on Apple and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
